By Marleen Kaesebier

(Reuters) -Aroundtown, one of Germany's largest-listed landlords, posted a first-quarter profit of 318.6 million euros ($360.21 million) on Wednesday, up three times year-on-year, as German commercial and residential property prices start to recover.

The profit, up from 102.3 million euros in the same period in 2024, follows Aroundtown's return to annual profitability in March after two years of losses as the country's real estate sector grappled with its worst crisis in decades.

Last month, German officials announced the loosening of a regulatory measure designed to soften the blow of a property crisis, a sign they are somewhat less worried about fallout from the country's troubled real estate sector.

The Luxembourg-based company said it had revalued 15% of its portfolio in the first quarter, reporting a 0.8% like-for-like value gain compared to December 2024.

First-quarter funds from operations (FFO I), a key metric for real estate companies, was almost unchanged from the same period a year earlier.

Aroundtown, which holds mostly office, residential and hotel properties, said it was benefiting from declining supply in its residential property locations, which include Berlin and London. Like-for-like rental growth increased by 4.5% compared with 1.6% for its office portfolio.

Aroundtown said it is seeing a growing "return to office" trend and expects office take-up growth of 8% in 2025, but it cautioned that geopolitical and economic uncertainties are making occupiers reluctant to make long-term commitments.

Though offices still make up the bulk of its portfolio, Frankfurt's largest listed office landlord is bolstering its residential business - partly by turning office spaces into serviced apartments.

Since the COVID-19 pandemic, the company has been converting some of its less sought-after office rentals. It said on Wednesday it expects most of its conversion projects to begin operations in 2026.

The realtor reaffirmed its 2025 outlook but opted not to recommend a dividend for 2024 for a third consecutive year, citing the need to "maintain a conservative financial position."

Shares in Aroundtown were up by 2.9% in morning trade.

($1 = 0.8845 euros)

(Reporting by Marleen Kaesebier in Gdansk; Editing by Jamie Freed, Sherry Jacob-Phillips and Helen Popper)