||The German market for office real estate has gained strong attention of international investors over the last three years. In 2006 the commercial real estate investment volume reached an all-time peak of EUR 49.4 bill., an increase of 109% after EUR 20.6 bill. in 2005 and EUR 16.8 bill. in 2004. As a consequence, the average prime office yields in the major markets Berlin, Düsseldorf, Frankfurt, Hamburg and Munich fell from 5.31% at the end of Q3 2005 to 4.65% at the end of 2006. The letting take-up in the five major cities exceeded the previous year by 16%, accompanied by a fall in vacancy rates. The increased demand for office space has resulted in rising prime- and average rents in all five cities except Berlin. The three indicators mentioned above (investment activity, yield compression and rent increase) suggest that the capital value of German residential properties has risen in 2006. However, the IPD Germany office index shows for 2006 a negative growth of -0.9%. In the presented paper, I argue that appraisalbased indices are in contradiction to German office market performance evidence. The aim is to present a transaction-inferred office property performance index that overcomes the shortcomings of appraisal-based indices and aligns performance reporting with market evidence.