In the decade of persistently low interest rates between 2012 and 2022, portfolio managers at institutional investors were desperately seeking more profitable alternatives to low-yielding fixed-income securities. Real estate, in particular, became the focus of attention. The result was a golden decade for the German real estate markets.

The asset class emerged as a favourable option for several reasons — and not only because of its greater return potential compared to bond yields, which found themselves at historic lows. Real estate’s potential as a hedge against inflation and its diversification benefits made it particularly appealing. Adding property to investment portfolios also helped mitigate overall risk, due to its low correlation with other asset classes.

Cashflow was king

As an added bonus, real estate generated relatively stable and predictable cashflows in the form of rental income, which was crucial for those institutional inves