German commercial property values slip in Q2, ending five-quarter rise

Commercial property prices in Germany contracted in the second quarter, ending a half-year run of increases, according to data from the banking association VDP. Year-over-year, office and retail assets fell 1 percent, reversing the 0.5 percent gain recorded in the first quarter. The downturn reflects heightened inflation expectations, higher borrowing costs and geopolitical uncertainty, especially the renewed conflict in Iran and the wider Middle East.

VDP chief executive Jens Tolckmitt noted that commercial real estate reacts more sharply than the residential market to such macro-economic pressures. While commercial values slipped, German home prices still rose, though the growth slowed to 1.9 percent from 2.3 percent in the previous quarter. The outlook for the sector will depend largely on the resolution of ongoing geopolitical disputes.