Greif & Contzen reports a total transaction volume of 1.3 billion euros generated with commercial real estate in Cologne in 2024. However, about half of this turnover was accounted for by only two transactions.

The year-end result recorded for Cologne’s investment market looks quite good at first glance: 1.3 billion euros were generated with commercial property – a year-on-year increase of some 60 percent. This suggests that the market situation has improved following a weak 2023. However, on closer inspection it shows that the considerable increase was due in particular to two extraordinarily large transactions: the City of Cologne bought both the northern part of the Koelnmesse trade fair grounds and the newly built office ensemble Rossio. Purchasing prices of just over 385 million euros for the trade fair halls and around 270 million euros for Rossio in Cologne-Deutz made the City of Cologne the most important market participant in 2024, accounting for around half of the entire transaction volume.

“The market situation would have remained fragmented and stagnant in 2024, without this special impact,” reports Thorsten Neugebauer, head of the investment properties division of Greif & Contzen Immobilienmakler GmbH. However, Neugebauer also points out a positive side of this development: “Potential exists in the market, there are interested prospective buyers, and recovery on this scale is possible and will happen eventually.”

It is the reluctant attitude of market participants that is holding back the market. In their short report about Cologne’s investment market issued at the turn of the year, the property experts from Greif & Contzen explain that the actions of many investors and sellers are still characterised by uncertainty. They have adopted a wait-and-see attitude in this environment that continues to be affected by a weak economy and the current domestic and foreign policy situation.

“Buyers frequently have internal yield or price targets that are upheld. At the same time there are various investment alternatives that have been offering a more attractive risk-reward ratio than real estate,” Neugebauer says. In their breakdown the researchers from Greif & Contzen report that net prime yields for logistics, office and retail buildings remain stable at 4.40 percent. A ten-year government bond that is considered risk-free in the market currently has a rate of return of 2.35 percent.

Cologne possesses some untapped potential, also when it comes to large-scale development projects. In this context, too, stakeholders are being reluctant because of the general circumstances: construction costs are high, user demand for space is reduced, and financing conditions are challenging. Neugebauer believes that the current base interest rate reductions will not give rise to a significant boost as these were anticipated and already taken into account in mortgage interest rates.

Compared to last year, Greif & Contzen expects a slight increase in transaction activity in the year 2025 that has just begun. “The high equity shares required by banks are leading to greater liquidity pressure in refinancing activities, while the poor economic situation is making it harder to let commercial space. This makes for an overall market situation in which sales could be necessary, leading to greater availability,” Neugebauer points out. Demand for commercial real estate continues to exist, so it will be possible to market such additional properties. “Cologne’s economic fundamentals are sound, and investors are keeping an eye on Cologne. We expect slightly higher product availability and a transaction volume of around 1.4 billion euros,” says Neugebauer in view of the months ahead.