Germany's commercial real estate market weakened in the second quarter, with prices for offices and retail buildings falling 1% from a year earlier after a 0.5% annual gain in the first quarter, VDP said on Monday. The drop ended five quarters of increases that had only partly recovered losses from the steep downturn that followed the war in Ukraine and triggered Germany's worst property crisis in decades. VDP said this year's conflict in Iran and the Middle East, much like the shock from Ukraine in 2022, has revived inflation fears and pushed interest rates higher, making commercial property financing harder. Residential real estate remained more resilient, with home prices rising 1.9% from a year earlier after a 2.3% increase in the first quarter, though momentum slowed. Jens Tolckmitt, CEO of VDP, said the commercial real estate market is reacting more strongly than housing to geopolitical developments, inflation expectations and rate trends, and added that the outlook depends in part on whether and when the many geopolitical conflicts are resolved.