Cologne's investment market achieved an exceptional transaction volume of 1.2 billion euros in 2024, representing an increase of 79% compared to the previous year (2023: 670 million euros). However, the result is largely attributable to two major transactions by the City of Cologne in the Deutz submarket: the acquisition of the exhibition grounds and the transaction for the "Rossio" project. Together, these special purchases accounted for more than half of the total volume. Excluding these deals, the transaction volume for the past year would have amounted to just 476 million euros. Compared to the previous year, this result, which highlights the structural challenges of the Cologne market, would have represented a drop of 29%.
The prime yield on Cologne's investment market was 4.5% at the end of 2024, slightly below the level of 2023 (5.0%). "This development shows that the first players are increasingly willing to adapt to the changed market conditions, which is noticeably driving the pricing process," explains Alexander Wunderle, Managing Director of Angermann NRW.
With a 58% share of the total volume, Deutz was by far the submarket with the highest turnover, followed by the city center, which accounted for 13% of turnover. By contrast, the other submarkets only recorded a low volume of sales.
A look at the asset classes shows that office properties and mixed-use properties dominated the market and together accounted for almost 85 % of the total transaction volume. Office properties achieved a share of 36%, while mixed-use properties accounted for 49%. Retail and hotels, on the other hand, accounted for only a small share of the overall result at 3% and 5% respectively.
"We continue to see strong interest in value-add properties. Particularly in an environment characterized by uncertainty and restrictive lending, these offer attractive prospects for investors. This is also evidenced by the brisk demand for our own offerings in this segment. The development of sustainable and innovative utilization concepts with which long-term value can be created will therefore continue to be decisive for success in the future," says Alexander Wunderle
Buyers with strong equity are at a clear advantage in the current market phase. As they can operate without financing problems, they are prepared to work with slightly lower returns. "These players dominate the office transaction segment in particular and are therefore making a significant contribution to stabilizing the market. In addition, the past twelve months have shown that many sellers who are not under pressure to sell remain cautious. Nevertheless, office transactions have been realized that confirm the new price level after the interest rate turnaround and create benchmarks for future deals," states Alexander Wunderle
In terms of transaction volume, the current "sweet spot" for investors is primarily between 30 and 100 million euros, although there is still a lack of attractive products in this segment. Apart from the two major transactions by the City of Cologne, the largest number of deals took place in the volume range up to €30 million with mainly risk-averse investors.
The clear dominance of national buyers was particularly notable in 2024. They were responsible for almost 90 % of the total transaction volume. On the seller side, their share was also high, albeit not as pronounced, at just under 60 %. The reluctance of international investors is based on several factors. For example, the drastic rise in interest rates in recent years has made real estate investments less attractive than alternative asset classes such as bonds. In addition, high construction costs and geopolitical uncertainties are making calculations more difficult for foreign investors. Added to this are the complex legal and regulatory requirements in Germany compared to other countries, which often have a deterrent effect.
Nevertheless, the strong presence of national capital underlines Cologne's attractiveness as a stable investment location. Market participants appreciate the reliable economic and legal framework conditions, as well as the low speculative construction volume, which offers security in a volatile environment. Nevertheless, the challenge remains to open up the location more to international investors again - whether through more transparent framework conditions or targeted incentives for foreign capital.
Outlook
"At Angermann NRW, we are currently seeing a revival in the market, which is reflected in increased activity and growing interest from both buyers and sellers. Demand is increasing, particularly in the segment of value-add products and mixed-use properties. Some investors are also increasingly interested in office properties in attractive CORE locations. This development indicates that investors are increasingly gaining confidence in market stability," explains Alexander Wunderle.
At the same time, uncertainties remain. "Many project developers are still under pressure, as rising interest rates and construction costs are putting pressure on their business plans. The question of how to continue paused or adjusted projects will continue to play a central role in 2025. Nevertheless, the current dynamic shows that the market is capable of adapting and offering opportunities for innovative and flexible players," states Alexander Wunderle.
