Transformation of the Munich Office Market – Facts, Trends, and Perspectives
- Gunnar Gombert STRATEGY CONSULTING
- Oct 8
- 3 min read
The Munich office market in 2025 is undergoing a period of profound structural transformation.
After nearly a decade of continuous growth, inflation, economic slowdown, rising interest rates, and changing occupier requirements have reshaped the market.
The key question now: how should occupiers, developers, and investors respond strategically to Expo Real 2025 Recap – Realism Returnsposition themselves for the next cycle?
This article summarises the main findings of Prof. Dr. Gunnar Gombert’s presentation at the 4th IU Conference on Construction, BPM & Real Estate (8 October 2025), highlighting current trends, challenges, and perspectives for one of Europe’s most resilient office markets.
Economic Environment – Stabilisation with Persistent Uncertainty
After two years of recession, the German economy is showing signs of stabilisation, albeit at a very modest level. GDP growth remains near zero, but sentiment in industry and services is improving. For 2026/27, moderate growth impulses are expected.
The ECB’s key interest rate stands between 1.75% and 2.0%, with financing conditions now largely stable. This interest-rate plateau reduces investment momentum but provides long-awaited planning certainty for real estate market participants.
In the construction sector, business expectations have improved slightly as material and energy costs stabilise.However, construction prices remain high, continuing to limit new project activity.
Munich’s Office Market in Transition
Demand – Consolidation over Expansion
Occupier demand remains below long-term averages. Large-scale leases (>5,000 m²) are rare, and many corporates pursue consolidation strategies, reducing space or adapting to hybrid work models.
As a result, vacancy has climbed to around 8% and continues to rise slightly.The gap between prime and secondary locations is widening: modern, ESG-compliant buildings in central locations maintain strong demand and rising rents, while B- and C-locations face growing leasing pressure.
Supply – High Pipeline, Rising Risk
Despite subdued demand, Munich’s development pipeline exceeds 500,000 m² of office space under construction or in advanced planning – much of it speculative. This concentration of completions through 2027 increases the risk of oversupply unless pre-leasing improves significantly.
Rents and Pricing – Flight to Quality Prevails
Despite rising vacancy, prime rents remain stable or even climb further, reaching up to €55/m²/month in the historic core. This underscores a clear “flight to quality”: occupiers are willing to pay a premium for modern, sustainable, and well-located space. Meanwhile, landlords of secondary stock face growing pressure, often offering longer rent-free periods or larger fit-out budgets.
The market is fragmenting more distinctly by quality, ESG performance, and flexibility.
Investment Market – Between Price Discovery and Reawakening
Munich’s investment volume remains well below the 10-year average, but early signs of recovery are emerging.Yield spreads between real estate and government bonds have stabilised, drawing renewed interest from institutional investors.
Prime office yields: approx. 4.6%, historically attractive.
Bid-ask gap: still wide, slowing transaction activity.
Investor sentiment: cautiously positive, with international buyers re-entering due diligence.
Munich remains a core investment location – transparent, liquid, and economically resilient.For opportunistic investors, current conditions provide a rare entry window to reposition secondary assets or secure prime stock at rebalanced pricing.
Strategic Implications for Market Participants
Occupiers – Use the Negotiation Window
Corporate occupiers currently hold a strong negotiating position:
Higher incentives and flexible lease terms create room for optimisation.
Portfolios should be reviewed for consolidation and efficiency potential.
Securing high-quality, ESG-compliant space early remains key before rental levels rebound.
Developers – Focus and Partner
Selectivity is the rule of the day.Projects should proceed only with strong pre-leasing or JV structures to reduce financing risks. Sound capital management, ESG integration, and multi-use flexibility are essential for long-term viability. In this cycle, quality and timing outweigh volume and speed.
Investors – Think Counter-Cyclically
For investors, the stabilising yield environment opens selective entry opportunities:
Acquire core assets before prices rise again.
Target Value-Add strategies via repositioning and ESG upgrades.
Exploit the bid-ask gap to secure discounts ahead of market normalisation.
Outlook – Between Market Correction and New Momentum
The next 12–24 months will likely bring continued market adjustment, paving the way for renewed growth from 2026 onwards.Munich’s fundamentals remain strong – a diversified economy, stable employment, and sustained occupier depth support long-term resilience.
Key challenges ahead include:
Adapting existing stock to new working patterns.
Implementing ESG standards, particularly for legacy assets.
Narrowing the bid-ask gap to revitalise the transaction market.
Conclusion: Munich remains one of Europe’s most robust and attractive office markets – but now more differentiated, selective, and quality-driven than ever.
Those who act strategically, focus on ESG, and prioritise operational excellence will define the next growth phase.