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Cologne’s real estate investment market: the COVID-19 pandemic leaves its mark, yet demand for investment properties remains strong

  • The transaction volume in Cologne’s investment market decreased considerably across all real estate segments in 2020
  • Hotels and retail buildings were particularly affected by the pandemic
  • Higher turnover was recorded in individual segments, such as condominiums
  • Sales processes for a number of large office properties were postponed, but not abandoned
  • The market is expected to recover in 2021


A total transaction volume of around EUR 5.3 billion was realised in Cologne’s real estate investment market in 2020. Across all real estate segments, this corresponds to a decrease of EUR 1.2 billion compared to 2019. However, in their latest market report, the property experts of Greif & Contzen point out that this year-on-year decline by around 18 percent cannot be attributed entirely to the COVID-19 pandemic. After all, a record-breaking result had been achieved in 2019. The ten-year average of Cologne’s real estate investment market is around EUR 4.7 billion, and this level was exceeded in the market even in the year 2020 that was shaped by the coronavirus. Greif & Contzen’s researchers are optimistic in their forecast for the current year, expecting that the pandemic will be contained further and that transaction activities in Cologne’s market will recover quickly. Previously postponed sales are likely to be concluded, and further turnover will be generated thanks to development properties that should be introduced to the market this year.

Ups and downs over the course of the year
“Several sales process that had been initiated in Cologne's investment market were slowed down when the economy started to be affected by the COVID-19 pandemic in the second quarter of 2020. The first lockdown hit institutional investors at a time when they usually set the course of the transaction activities of the business year ahead,” says Thorsten Neugebauer, Head of Investment of Greif & Contzen Immobilienmakler GmbH, summarising the first half of 2020. “In view of uncertainty regarding the further development of letting markets, the financial situation of tenants and prices under these unprecedented conditions, decisions regarding sales were postponed repeatedly,” the property expert continues. “While the investment market started to recover noticeably in the summer months owing to continued pressure to invest, investors remained hesitant given the prevailing uncertainty regarding the duration and further course of the pandemic. Some sales were postponed further, and the second lockdown that started in November, caused further delays to sales processes.”

Market activity varies between different segments
Neugebauer reports that market activity varied greatly between the different real estate segments. “The sale of a number of very big office buildings was postponed, but overall investor demand remained high in this segment. The same is true for residential, industrial and logistics properties, as well as development sites that were all sought after by investors. Purchasing prices for apartment buildings, condominiums and logistics properties increased over the course of the year and yields declined further.”

Reluctance to buy retail buildings and hotels
The industries that were hit the hardest by the pandemic-related restrictions, are those who cannot offer their products or services and are struggling with slumps in sales that can even force businesses to close down. In the investment market, this was reflected in a reluctance to buy retail buildings and hotels. “In these segments, sales decreased in line with the turnover generated in brick-and-mortar retailing and with the number of overnight stays in hotels. Investor demand has been very restrained here,” says Neugebauer.

Office properties are still the best-selling commercial property asset class
Office properties remained the best-selling asset class in the commercial property segment, despite the fact that a number of large-scale transactions were postponed, and that the transaction volume decreased considerably compared to the year before. Well-let properties were highly sought after among investors. New and existing buildings changed hands, also beyond the city centre. The prime yield stagnated at 3.0 percent.

Retail properties: supermarkets achieve higher revenues
The retail property market was characterised by the sale of a large Metro store in Cologne-Godorf to the investors P3 as part of a portfolio for the Singaporean government fund GIC for an estimated EUR 65 million. It was essentially due to this individual high-price transaction that the investment volume increased from EUR 150 million in the year before to EUR 180 million in 2020. The overall situation in the retail property segment was rather heterogeneous. Owing to the pandemic, investors were rather hesitant with regard to retail buildings in the prime shopping locations, especially since a number of textile chains experienced financial difficulties. The crisis experienced by inner-city retailing was accelerated and intensified by the COVID-19 pandemic. This gave rise to a decline of rent prices. The prime yield on retail buildings increased for the first time in many years to currently 3.0 percent.

Industrial and logistics properties: further increase in investor demand
The transaction volume realised with industrial and logistics properties within Cologne’s city limits increased to around EUR 310 million in 2020. Further large-scale transactions took place in the greater logistics region of Cologne | Bonn. Busy sales activities could be observed in Kerpen, Frechen and Euskirchen in particular. A transaction volume of around EUR 270 million was generated in the entire region in 2020, and the prime yield dropped to 3.6 percent.

Hotels: huge losses of turnover
The hotel market that had been booming in recent years, was hit by dramatic losses and some hotels even had to close owing to the pandemic-related restrictions. The few properties that were sold after all, totalled at an investment volume of around EUR 70 million. Greif & Contzen’s researchers predict that once the tourism and business travel situation is back to normal, the financial situation of hotels should improve soon and investor interest is likely to increase once again.

Residential properties: prices do not suggest urban exodus
“The new-found preference to live outside the city due to the pandemic that has been referenced repeatedly over the past few months, is not reflected in the investment market,” property expert Thorsten Neugebauer points out. Neugebauer continues to explain that the markets for apartment buildings and condominiums are still characterised by excessive demand and corresponding price increases. Compared to 2019, the transaction volume generated with condominiums rose by about nine percent to around EUR 1.6 billion in 2020. However, the number of apartments sold was about the same, which means that the increase was due mostly to higher purchasing prices.

Apartment buildings: investors continue to demonstrate a keen interest
The investment volume generated with apartment buildings decreased to around EUR 920 million in 2020. “Investor interest in this asset class remains very strong, since rental income has been more stable here than in the other real estate segments,” says Thorsten Neugebauer. Purchasing price factors continue to increase. The real estate experts of Greif & Contzen expect a core range of between 20 and 34-fold the annual net rent for 2021.

Outlook: 2021 is also shaped by the coronavirus, but there are signs of a market recovery
“2021 will also be characterised by the pandemic,” Thorsten Neugebauer reports. Despite positive prospects with regard to vaccinations, the situation remains uncertain in view of unstable infection figures and the emergence of mutant viruses. Many companies continue having to navigate in challenging economic waters. Nevertheless, economic forecasts suggest a recovery over next few months, despite any uncertainties, provided that restrictions are eased and supply chains are not interrupted. “In addition to this, investors continue to be under strong pressure to invest in the persistent low-interest rate environment. Capital is readily available and there is strong interest especially in residential, office, industrial and logistics properties, as well as in development sites,” says Neugebauer. Greif & Contzen’s property experts expect that the postponed sales processes from last year will further support the investment volume generated in 2021. “Transactions on a considerable scale are already being prepared for 2021,” Neugebauer points out. “The 10-year average could be exceeded once again this year.”

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