Are you facing the decision of which property to invest in? A direct comparison of returns between different types of real estate often reveals surprising results. This article analyzes which asset class provides the most stable returns and the greatest potential for appreciation in the current market environment.
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The topic briefly and concisely
Residential properties offer stable returns of 3-5% and high demand security, especially in urban centres.
Commercial properties enable higher returns of 5-8% but are more dependent on the economic climate and subject to longer vacancy periods.
Special properties like care homes or logistics properties often offer above-average, economic cycle-independent returns, but they require specific expertise.
Choosing the right type of property is crucial for investment success. While the German real estate investment market reached a transaction volume of around 15.3 billion euros in the first half of 2025, remaining at the previous year’s level, clear differences in the performance of individual segments are evident. But which asset class suits your strategy? This article provides a detailed comparison of returns across different property types and shows you what to consider when making your decision.
The Essentials in Brief
Residential Properties: Offer stable returns of 3-5% and strong demand, especially in urban centres.
Commercial Properties: Enable higher returns of 5-8% but are more dependent on economic conditions and longer vacancy periods.
Special Properties: Niches such as care homes or logistics properties often provide above-average, economic cycle-independent yields but require specific expertise.
Location and Condition: These factors often influence returns more than the property type itself; a prime location can exceed the yield of a less desirable one by up to 50%.
Residential real estate: A stability anchor with solid returns
Living space is always in demand. This simple fact makes residential properties one of the most crisis-resistant forms of investment with consistent demand. In Germany, private individuals rent out around 15 million apartments, which underscores the stability of this market segment. The rental yields typically range from 3% to 5%, depending on the micro and macro location of the property.
In particular, in the seven largest metropolises like Berlin or Hamburg, demand remains high, even though the transaction volume in Berlin recently dropped by 45%. The advantage for you as an investor lies in the low volatility and low vacancy risk. A detailed analysis of whether it is worthwhile to rent or sell is still essential. The challenge is to find properties where the purchase price justifies the moderate yield, as the rental price multiplier should be around 25 to be profitable. This stability forms the basis for many portfolios before riskier investments are considered.
Commercial real estate: Higher return opportunities with higher risk
In a direct yield comparison between different types of real estate, commercial properties offer more potential at first glance. Yields of 5% to 8% are not uncommon here and are therefore often twice as high as those for residential properties. Long-term leases, often over 10 years, secure income and reduce administrative effort. For example, logistics properties remain a favorite among investors with a stable prime yield of 4.75%.
However, this asset class is heavily dependent on economic development. An economic downturn can lead to longer vacancies and rental defaults. While the office market is slowly stabilizing with a slight yield compression to 4.33%, the risk here is higher than in the residential segment. For investors, this means that a careful assessment of the tenant's creditworthiness and the future viability of the industry is essential. The right investment strategies help minimize these risks and capitalize on opportunities. Next, we will look at an asset class that benefits from long-term demographic trends.
Special properties: Attractive niches for connoisseurs
Away from the classic paths, special properties such as nursing homes, medical centres, or data centres offer interesting diversification opportunities. The market for healthcare properties, for instance, is steadily gaining in importance, driven by demographic changes. By 2040, Bavaria alone is forecast to have an additional demand for care places of 19.3%. These properties are considered to be independent of economic cycles and offer stable returns, often exceeding those of traditional commercial properties.
The advantages for investors are clear:
Long-term leases with operators of 20 years or more.
State-refinanced rents that ensure high payment security.
A growing demand that minimizes vacancy risk.
Often less administrative effort, as the operator is responsible for many aspects.
However, entering the market requires specific knowledge of the operator market and regulatory frameworks. The transaction volume for healthcare properties has averaged 2.1 billion euros per year over the past ten years, reflecting the increasing institutionalisation. A careful examination of the potential for value increase is particularly important here. But no matter which type of property you choose, one factor surpasses all others in significance.
The ultimate return lever: Location, condition, and data analysis
The best comparison of returns between different types of real estate is incomplete without the guiding principle: Location, location, location. A prime property in a C location will rarely achieve the performance of an average property in an A location. Factors such as infrastructure, demographics, and local economic strength can influence the return by several percentage points. A property in good condition with high energy efficiency also attracts more solvent tenants and secures long-term income.
Instead of focusing solely on the asset class, you should make a data-driven decision. Modern valuation tools for investors enable precise analysis. With Auctoa's ImmoGPT, for example, you can immediately receive a neutral assessment based on thousands of market data. This helps you determine whether the required return of 4.5% for an office building in a B location is realistic or if a residential property in an up-and-coming location might not be the better choice. The right strategy combines the selection of property type with an in-depth location and property analysis.
Conclusion: The right mix is key to success
There is no single, universally valid winner in the return comparison of different types of real estate. The optimal choice entirely depends on your personal risk appetite, investment horizon, and capital resources. Residential properties offer a secure foundation with returns around 4%. Commercial properties entice with yields of up to 8% but require active management of economic risks. Special real estate can enhance your portfolio with steady, demographically driven cash flows. The key to success lies in the objective, data-supported assessment of each individual opportunity. Do not rely on general statements, but analyse each property individually. A professional, AI-driven assessment by Auctoa protects you from costly mistakes and unveils the true potential of your next investment.
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Additional useful links
The Statistische Bundesamt offers comprehensive information on construction prices and property price indices in Germany.
A press release from the Statistische Bundesamt provides information on current developments.
Another press release from the Statistische Bundesamt gives insights into relevant topics.
Statista provides detailed statistics on the house price index in Germany since the year 2000.
The Statistische Bundesamt offers comprehensive information on the subject of living in Germany.
The Deutsche Bundesbank presents its indicator system for the housing market.
The Deutsche Bundesbank publishes statistics on real estate and construction performance prices.
An article by Deutsche Bundesbank examines the decline in residential property prices in 2023 and the increasing pressure on rents.
The Federal Institute for Research on Building, Urban Affairs and Spatial Development (BBSR) offers an interactive dashboard for the real estate market report.
FAQ
How do I calculate the net rental yield of my property?
To calculate the net rental yield, subtract all non-recoverable management costs (administration, maintenance reserves) from the annual net cold rent and divide the result by the total purchase price (including additional costs). Multiply the result by 100 to get the percentage value.
What risks are associated with commercial real estate?
The main risks are the vacancy risk between two tenancies, which often lasts longer than for residential properties, and the dependence on the tenant's economic situation (insolvency risk). Furthermore, the administrative and renovation effort during tenant changes is usually higher.
What are the advantages of specialized properties such as logistics centers?
Logistics properties benefit from the booming e-commerce sector. Advantages include very long lease agreements, creditworthy tenants from trade and industry, and stable returns. The prime yield for logistics properties was a steady 4.75% at the beginning of 2025.
Should I invest in A, B, or C locations?
A locations offer the highest security and value stability, but lower initial returns. B and C locations can yield higher returns but also carry greater risks regarding future demand and value development. A balanced strategy can combine investments in different locations.
How can Auctoa assist me in making investment decisions?
Auctoa offers you an AI-powered, data-driven property valuation. Our system analyses thousands of comparable properties and market data to provide you with an impartial and precise assessment of return opportunities and the fair market value. This enables you to make informed decisions without relying on gut feelings.
What additional purchase costs should I consider when calculating the return?
To calculate the return, you must use the full investment amount. This includes, in addition to the purchase price, land transfer tax (3.5% to 6.5% depending on the federal state), notary and land registry fees (approximately 1.5-2%), as well as any brokerage fees (often 3.57% to 7.14%).
