Is German industrial undervalued?
Explore the potential of Germany’s industrial real estate sector, driven by growth in defence spending and e-commerce, amid challenges in other areas.
German commercial real estate (CRE) faces challenges – the industrial sector is best positioned for outperformance.
The rise in German bund yields will pressure commercial real estate values, particularly for office, residential, and retail. In contrast, industrial and hotel sectors still screen as fairly valued. Over the next five years, industrial is projected to be Germany’s top-performing CRE sector, with expected unlevered returns averaging 6.7% annually from 2026 to 2030. Factors such as increased defence spending, nearshoring, and the growth of e-commerce are anticipated to drive demand.
The German defence industry has seen significant growth since 2022, particularly in major cities like Hamburg, Berlin, and Munich. This trend is expected to continue, bolstered by government fiscal packages aimed at defence and infrastructure. As a result, these cities are likely to experience faster property value growth compared to others.
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