European Union Real Estate Market Outlook 2025–2028: Residential & Commercial Trends, Risks, and Opportunities

Introduction

The European Union’s real estate market is at a pivotal moment in 2025. After weathering a turbulent period of soaring inflation, rapid interest rate hikes, and pandemic-era disruptions, both the residential and commercial sectors are entering a phase of cautious recovery. Stabilizing macroeconomic conditions – including easing inflation and the first interest rate cuts – have improved predictability for investors and developers pwc.com mediaassets.cbre.com. At the same time, persistent housing supply shortages and evolving post-pandemic occupier demands are shaping market dynamics across EU member states. This report provides a comprehensive analysis of the EU real estate landscape in 2025, covering macroeconomic context, residential and commercial sector trends, key country markets (Germany, France, Spain, Italy, Netherlands, Poland), pricing, supply-demand balance, investment flows, construction activity, policy changes, and a forward-looking outlook through 2028. Key themes include the impact of high (but stabilizing) interest rates, the push for sustainability and ESG compliance, and emerging opportunities amid lingering risks.

Macroeconomic Context in 2025

Europe’s broader economic backdrop in 2025 is one of moderate growth and cooling inflation. After narrowly avoiding recession in 2023, the EU economy is projected to grow around 1.1% in 2025, with the euro area slightly under 1% economy-finance.ec.europa.eu. This tepid growth – essentially on par with 2024’s performance – reflects still-fragile consumer demand and external uncertainties. Notably, Spain and Poland stand out with above-average GDP growth forecasts (~2.5–3+%), whereas Germany’s growth is expected to remain subdued around 0.8% mediaassets.cbre.com, given recent industrial stagnation. France and Italy likely track the EU average near 1% growth, hampered by softer consumer spending and export demand cbre.fr.

Crucially for real estate, inflation has come down sharply from its 2022 highs. Eurozone headline inflation is forecast to average ~2.1% in 2025 (from 2.4% in 2024) pubaffairsbruxelles.eu, essentially nearing the ECB’s 2% target by 2025–2026. This disinflation, along with slowing core price growth, has allowed the European Central Bank to halt and slightly reverse its aggressive tightening. After peaking at a 4% deposit rate in late 2023, the ECB began cutting rates in mid-2024; by April 2025 the policy rate was down to ~2.25% economy-finance.ec.europa.eu. Other central banks in Europe saw similar turns. As a result, borrowing costs in 2025 remain high relative to the 2010s but have eased off their 2023 peaks, relieving some pressure on credit-dependent sectors like real estate. For instance, average mortgage rates in France fell back to ~3.3% in early 2025 after exceeding 3.5%, and Poland’s central bank slashed its policy rate from 6.75% to around 5% by 2025, boosting buyers’ capacity.

Interest rate impacts are therefore twofold: On one hand, the 2022–2023 rate spike severely dented affordability and investment volumes; on the other, the stabilization and slight decline of rates by 2025 have improved sentiment. Developers and homebuyers now have greater confidence that financing conditions will gradually improve rather than suddenly worsen pwc.com. Indeed, financing conditions are becoming more supportive of deals – positive leverage is “possible again” as debt costs inch down and yield spreads stabilize cbre.com cbre.com. Nonetheless, rates are not returning to the ultra-low levels of the 2010s mediaassets.cbre.com. Long-term yields remain elevated, which caps how much property prices can re-inflate. The consensus is that 2024 was the cyclical bottom for investment and 2025 will see a gradual recovery rather than a dramatic boom cbre.com.

Another macro factor is geopolitical uncertainty, which continues to cast a shadow. The war in Ukraine and global trade tensions have kept energy prices and business confidence volatile. While Europe’s gas/energy prices are much lower than in 2022, any new shock could rekindle inflation and force central banks to pause rate cuts pwc.com. Political events – such as Germany’s upcoming elections or potential U.S. trade policy changes – also pose risks to growth and investor sentiment reuters.com reuters.com. For now, however, baseline expectations through 2025 are steady if unspectacular economic growth, falling inflation, and a plateau in interest rates, which together provide a more stable backdrop for real estate decisions than the prior two years.

Residential Real Estate Trends: Recovery Amid Supply Crunch

Europe’s housing markets in 2025 exhibit a mix of resilience and constraint. After a dip or slowdown in many countries during 2022–2023, home prices are broadly stabilizing or rebounding in 2025, fueled by chronic supply shortages and improved buyer confidence as financing becomes easier. However, regional divergences are stark: some markets are surging to new highs while others only bottom out after recent declines.

Figure: Nominal house price growth in EU countries, comparing year-over-year change in Q4 2023 (blue bars) vs Q4 2024 (yellow bars). Many markets swung from decline to growth by late 2024. Several countries (left side) saw double-digit price rises in 2024, including Spain, the Netherlands, Poland, Portugal, Hungary, and others, whereas Germany, Sweden, and France (right side) had either modest gains or continued modest declines economy-finance.ec.europa.eu. This reflects the uneven recovery across Europe’s housing markets.

Pricing trends: According to Eurostat data, EU-wide house prices rose about 4% (nominal) in 2024, and continued gains are expected in 2025 – though the magnitude varies considerably by country. In Germany, which experienced one of Europe’s sharpest corrections, prices fell ~12% from 2022 into mid-2024 reuters.com, but have since stabilized. By Q4 2024 German prices posted their first annual increase (+1.9% YoY) after nine consecutive quarters of decline globalpropertyguide.com. Surveys predict German home values will regain ~3–3.5% in 2025 reuters.com, helped by lower mortgage rates, though risks are tilted to the downside if economic or political uncertainty persists reuters.com. In France, house prices have been gently deflating; Q3 2024 saw –3.96% YoY for existing homes globalpropertyguide.com. That downturn is easing, with the decline projected to slow to –0.7% by early 2025 and a floor in prices expected around late 2024 globalpropertyguide.com globalpropertyguide.com. Paris apartment values, for example, dropped ~5.5% in 2024 (the 13th straight quarter of decline) globalpropertyguide.com, and should stabilize in 2025 as credit conditions improve and government support measures take hold.

Contrast this with Spain, where the housing market is buoyant. Spanish house prices rose a scorching +11% in 2024 on average – the fastest since 2007 – and were still up ~11.2% YoY in Q1 2025 globalpropertyguide.com globalpropertyguide.com. Strong domestic demand, returning foreign buyers, and a growing economy (2%+ growth) have kept Spain’s market “buoyant throughout 2025” by many accounts idealista.com. Even conservative forecasts see Spanish prices climbing another 5–8% in 2025 spanishpropertyinsight.com spanishpropertyinsight.com. Poland too is witnessing robust price growth: amid high inflation and wage gains, Polish apartment prices rose ~8% YoY in early 2025 on the secondary market (and ~4–6% on new builds) globalpropertyguide.com globalpropertyguide.com. Despite a steep drop in sales in 2023, buyer demand in Poland is now recovering thanks to interest rate cuts and a government 2% mortgage subsidy program for first-time buyers globalpropertyguide.com globalpropertyguide.com. The Netherlands offers another example – after a brief dip in 2023, Dutch home values jumped +8.7% in 2024 to record highs abnamro.com. Banks forecast another ~7% rise in 2025, citing falling mortgage rates, rising incomes, and the persistent housing shortage as key drivers abnamro.com. Indeed, Dutch house prices have risen over 7% annually in all recent years except 2023 abnamro.com abnamro.com. Even where markets were weak, the turnaround signals are evident: Sweden, Austria, and Germany, which had significant contractions in 2023, returned to modest positive price growth by late 2024, while France and Finland were the last major markets still showing slight annual declines economy-finance.ec.europa.eu. Overall, most European housing markets are expected to see price rises in 2025 as the cycle turns upward fitchratings.com.

Supply and demand dynamics: A critical factor underpinning residential prices is the imbalance between housing demand and supply. Simply put, Europe is not building enough homes to meet household formation and urban migration trends, and this shortage has worsened recently. Housing supply has sharply contracted since 2022, as developers pulled back amidst high interest costs, material price inflation, and permit bottlenecks economy-finance.ec.europa.eu economy-finance.ec.europa.eu. EU-wide housing completions plummeted in 2023–2024 (down by double digits) and building permits fell to multi-decade lows economy-finance.ec.europa.eu. For example, in Germanynew housing construction is collapsing – permits in 2023 dropped ~27% and starts 25%, the lowest volumes since 2000 globalpropertyguide.com. Germany is now adding far fewer than the ~320,000 units per year it needs to meet even revised targets (a government study shows a requirement of ~2.5 million new dwellings by 2030, well above current output) globalpropertyguide.com globalpropertyguide.com. The shortfall is stark: “a huge gap between what needs to be built and what is being built,” as one German housing economist put it globalpropertyguide.com. This is intensifying Germany’s housing shortage, especially in big cities where population growth from migration continues (Berlin, Munich, etc. each need tens of thousands of new units annually) globalpropertyguide.com globalpropertyguide.com.

Similar stories echo across the EU. France’s residential construction is in a prolonged downturn – 2023 saw permits and housing starts crash ~23–25% YoY globalpropertyguide.com, and 2024 is on track to be even worse, described by industry groups as “catastrophic” globalpropertyguide.com. French new housing starts in 2024 were barely ~260,000 units globalpropertyguide.com, the lowest since at least 2000. Builders face soaring material costs (post-Ukraine war) and new environmental regulations that raise costs, while buyers face higher mortgage rates globalpropertyguide.com. Although officials hope for a mid-2025 stabilization, the French Building Federation predicts continued stagnation and only ~239,000 housing starts in 2025 globalpropertyguide.com. Italy, too, suffers weak homebuilding – authorized new residential buildings fell again in 2024 (–0.2% after a –7.7% drop in 2023) to only ~55,000 units, a fraction of mid-2000s levels globalpropertyguide.com. This long-term decline (Italy was building 250k+ homes per year in the 2000s, versus ~50k now) contributes to tight supply in high-demand cities globalpropertyguide.com. Even in booming Spain, construction is only cautiously picking up: 2024 housing starts were ~112,000 units, up 14.5% from the prior year as builders responded to price growth globalpropertyguide.com. But that is still modest relative to Spain’s needs and far below pre-2008 levels. Poland, one of Europe’s fastest-growing markets, saw housing completions fall over 20% in 2022–2023 amid high interest costs, though a moderate rebound is forecast as rates come down globalpropertyguide.com globalpropertyguide.com. In short, new supply is constrained almost everywhere by high financing and construction costs, regulatory hurdles, and land constraints, just as demand drivers (urban population growth, smaller households, better wages) continue apace globalpropertyguide.com globalpropertyguide.com. Many countries are experiencing record-low rental vacancy and intense buyer competition for quality properties.

On the demand side, household formation and migration keep housing need elevated. Germany, for instance, added 3% to its population over the past decade (largely via immigration) which is concentrated in major cities globalpropertyguide.com. Poland has absorbed over a million Ukrainian refugees, many of whom are now renting or buying homes globalpropertyguide.com. Even where overall population is stagnant, a shift toward single-person households and continued urbanization support housing demand. Thus, demand is outpacing supply across much of Europe, which underpins prices despite affordability challenges. The European Commission notes that in many member states, “constrained supply of new housing has become one of the main drivers of continued house price growth” as of 2024 economy-finance.ec.europa.eu. This is especially true in supply-starved markets like the Netherlands, where chronic undersupply has kept prices on an upward trajectory in 2024–25 abnamro.com.

Rents and rental markets: Tight supply is also driving up rents, though some countries have imposed rent caps. Germany remains a renters’ market (over 52% of households rent globalpropertyguide.com) and continued demand pushed rents up ~3.5% in 2024 (down from 5% in 2023) globalpropertyguide.com. Other markets with strong rent growth include Ireland, the Netherlands, and Central Europe. Notably, Dutch residential rents are set to jump as much as 7–8% in 2025 under inflation indexation, and as private landlords sell off units (reducing rental supply) due to new regulations iamexpat.nl abnamro.com. Poland has seen an influx of renters (Ukrainian families), boosting rents and yields – gross rental yields average above 6% in Poland’s cities globalpropertyguide.com. Rental stock in some countries is actually shrinking: for example, new rent control laws and taxes in the Netherlands (Affordable Rent Act) are prompting small landlords to exit, selling units to owner-occupiers abnamro.com. This “privatization” of former rentals, also observed in Germany and Spain, further squeezes rental supply and can paradoxically worsen affordability over time mediaassets.cbre.com mediaassets.cbre.com. Policymakers face pressure to intervene as tenant affordability erodes, but measures like rent caps may deter investment and reduce supply in the long run mediaassets.cbre.com mediaassets.cbre.com.

Mortgage finance and affordability: The late-2023/early-2024 surge in mortgage rates did significantly weaken housing affordability, but conditions started improving in 2024. Across the EU, household borrowing capacity fell sharply in 2022–23 – incomes couldn’t keep up with rising mortgage costs, forcing many buyers to postpone purchases economy-finance.ec.europa.eu economy-finance.ec.europa.eu. Mortgage credit growth turned negative and prices dipped in response. Now, with interest rates inching down, borrowing capacity rebounded strongly in 2024, outpacing the rise in home prices economy-finance.ec.europa.eu economy-finance.ec.europa.eu. This is a key “turnaround signal” for housing: buyers who were locked out at 3.5% or 4% interest can re-enter if rates move toward, say, 2.5–3%. Still, affordability remains stretched – the ratio of house prices to borrowing capacity is well above long-term norms economy-finance.ec.europa.eu, meaning it still takes historically high effort to finance a home. In many countries real house prices have outpaced income growth in the past 5 years, creating affordability gaps economy-finance.ec.europa.eu. Stricter lending criteria have partly mitigated risk (e.g. Dutch and Polish banks apply stringent debt-to-income limits, which ABN AMRO notes kept households “financially stable” even as prices rose abnamro.com). But going forward, affordability constraints will limit the pace of price growth – markets with the steepest recent appreciation (Spain, Netherlands, etc.) could cool if buyers hit a ceiling of what they can pay.

Country spotlights – housing:

Germany: High demand, low construction, tentative recovery. Germany’s housing shortage is acute – major cities face a “pronounced imbalance” of demand over supply globalpropertyguide.com. New government pledges in 2025 aim to spur construction (e.g. streamlined permits, more land supply) globalpropertyguide.com, but any impact will lag. After two years of falling prices, German house prices are stabilizing. Late 2024 showed nominal price upticks (~+1–2% YoY) globalpropertyguide.com, though real prices were flat to slightly negative. Forecasts see moderate price growth (~3%) in 2025 reuters.com, assuming ECB rate cuts continue. Risks include Germany’s sluggish economy (which contracted in 2023–24) reuters.com and policy uncertainty around the 2025 federal election reuters.com. Rents are still rising, albeit at a slower 3–4% annually globalpropertyguide.com. With more than half of Germans renting and few affordable homes to buy, pressure is on policymakers to expand supply – otherwise, both rents and prices are expected to keep climbing over 2025–2028 (albeit at modest rates).
France: Bottoming out after mild correction. France’s housing market saw a gentle deflation of prices over 2021–2024, with a cumulative ~5–10% decline in real terms. By end-2024, existing home prices were ~4% below year-earlier levels globalpropertyguide.com, although the pace of decline slowed markedly (just –0.7% YoY expected by Feb 2025) globalpropertyguide.com. Paris values are off their peaks (down ~5% YoY), improving affordability slightly globalpropertyguide.com. 2025 should mark a turning point into stability or slight growth, helped by government support for buyers (e.g. expanded zero-interest loans, extended mortgage terms) and an expected easing of credit conditions globalpropertyguide.com. However, France’s recovery will be constrained by very low new construction – housing starts in 2024–25 are at their weakest in decades globalpropertyguide.com globalpropertyguide.com. Inventory of new homes is down, which could limit transactions but also put a floor under prices. The macroeconomic context in France (near-zero GDP growth and rising unemployment in 2024–25 cbre.fr cbre.fr) isn’t particularly supportive of housing demand, yet low supply and still-strong household savings are mitigating factors. Expect French prices to flatten out in 2025 and possibly rise slightly into 2026, with wide regional variation (Paris may lag secondary cities in any rebound).
Spain: Hot market, broad-based growth. Spain is one of Europe’s standout performers. House prices rose ~8–11% annually in both 2023 and 2024 globalpropertyguide.com globalpropertyguide.com, and predictions for 2025 remain bullish (e.g. +6% to +8% per Fitch Ratings) spanishpropertyinsight.com spanishpropertyinsight.com. Demand is fueled by a growing economy (Spain’s GDP is set to rise ~2–2.5% in 2025 mediaassets.cbre.com), low unemployment, and the return of foreign investors/tourists. Even with higher interest rates, Spanish buyers have benefited from more fixed-rate mortgage options and rising incomes. Construction is recovering – housing starts jumped +14.5% in 2024 globalpropertyguide.com – yet supply still lags the boom in demand, ensuring continued competition for properties. Notably, coastal regions and Madrid/Barcelona are seeing the strongest price gains, while some inland areas are steadier. Rents are also climbing. The Spanish government enacted a new housing law in 2023 that caps rent increases in “stress” areas and offers tax incentives for affordable rentals. This may temper rent hikes in big cities, but given the house price momentum and limited rental supply, rent inflation around 5%+is expected in 2025. Overall, Spain’s outlook (barring an external shock) is positive, with a buoyant market likely extending into 2026, though perhaps not at double-digit growth forever as affordability will eventually tighten.
Italy: Modest growth amid constraints. Italy’s housing market has been comparatively subdued. After years of stagnation, prices picked up around 2021–2022, then plateaued. Official data show house prices up ~4.5% YoY in Q4 2024 (the fastest in nearly 3 years) globalpropertyguide.com, driven by a recovery in buyer demand and very limited supply of quality homes. New home prices especially jumped (+9.3% YoY) as construction costs were passed on globalpropertyguide.com. However, private listing data indicate a soft patch in Q1 2025, with average prices down ~2.6% YoY (–4.6% real) as high mortgage rates earlier in 2024 curtailed activity globalpropertyguide.com. Essentially, Italy’s market is flat in real terms, with perhaps slight nominal growth continuing. Major cities like Milan and Rome are outperformers – e.g. Rome’s prices +3.4% YoY in Q1 2025 globalpropertyguide.com and Milan hitting new highs – while many smaller markets lag or even show mild declines. Demand in Italy is stabilizing; transaction volumes in early 2024 were flat (+0.3% YoY) after a drop in 2023 globalpropertyguide.com. Supply remains a headwind – Italy isn’t building much new housing (permits in 2024 were flat at ~55k units globalpropertyguide.com), and a generous home renovation subsidy (the “Superbonus 110%”) that boosted activity in 2021–22 has been discontinued, causing a slump in construction firms’ workload globalpropertyguide.com. On the positive side, credit access improved slightly (fewer buyers are being denied loans now, per Banca d’Italia) globalpropertyguide.com. For 2025–2027, expect Italian house prices to inch upward in line with inflation (perhaps ~2% annually), with no boom but no crash. The north (Milan, etc.) will remain more dynamic than the south.
Netherlands: Strong rebound, ongoing shortage. The Netherlands saw one of Europe’s sharpest pandemic-era price booms (+15% in 2021) followed by a correction in 2022–23 as rising interest rates bit hard. That correction proved brief – by mid-2024 prices were rising again, and 2024 ended with +8.7% price growth, reaching record highs abnamro.com. Drivers include a structural housing shortage (estimated well into the hundreds of thousands of units), robust wage growth, and a quick normalization of mortgage lending. In 2025, Dutch house prices are forecast to climb ~7–9% abnamro.com abnamro.com – one of the fastest in Western Europe – before cooling to ~3–5% in 2026 as affordability limits re-emerge. Interestingly, price growth is now led by smaller cities and rural areas, while Amsterdam and other big cities see slower gains abnamro.com. This is partly because government policies (like tighter buy-to-let rules and upcoming rent controls on mid-market rentals) have caused investors to sell off rental apartments in cities, boosting supply for owner-occupiers in those markets abnamro.com. Transaction volumes are rising again – ABN AMRO revised 2025 sales forecasts up to +5% YoY, noting many landlords are rushing to sell before new regulations take effect abnamro.com. Nonetheless, overall housing supply remains tightand new construction is constrained by environmental rules (e.g. limits on nitrogen emissions delaying projects) and labor shortages. Thus, the outlook for the Dutch housing market is continued price and rent increases, albeit at a more moderate pace after 2025, and persistent affordability challenges for first-time buyers.
Poland: High growth potential, externally influenced. Poland’s housing market has expanded rapidly over the past decade, and despite a hiccup in 2022–23 due to very high interest rates, it remains on a growth trajectory. In early 2025, Polish apartment prices were still rising ~5–10% year-on-year in major cities globalpropertyguide.com globalpropertyguide.com. The market cooled in 2023 when sales plunged (–31% YoY) as mortgages became expensive globalpropertyguide.com, but a “moderately optimistic” tone has returned thanks to falling inflation and a series of rate cuts by Poland’s central bank globalpropertyguide.com. A new “First Home” subsidized loan program (offering 2% fixed-rate mortgages for young buyers) launched in mid-2023 has boosted demand for affordable units globalpropertyguide.com. However, the rebound is uneven: in Q1 2025, sales of new flats were still down ~17% YoY overall, and some cities like Kraków and Łódź saw new-home sales drop 25%+ YoY, leading to a growing stock of unsold units globalpropertyguide.com globalpropertyguide.com. JLL warns of a mismatch in certain cities – e.g. Kraków now has over 2 years of housing inventory at the current slow sales pace globalpropertyguide.com globalpropertyguide.com. Warsaw and the Trójmiasto (Tri-City) area remain more balanced with healthier sales globalpropertyguide.com. Market experts anticipate demand will stabilize in 2025, supported by broad-based wage growth and lower interest rates, avoiding any crash or wave of developer bankruptcies globalpropertyguide.com. One notable trend: foreign buyers are increasingly active in Poland, now accounting for 30%+ of sales in some new developments (especially in Warsaw suburbs) globalpropertyguide.com globalpropertyguide.com. Most are Ukrainians (many with long-term plans to stay in Poland), along with other CEE and Asian buyers, all attracted by Poland’s relative stability and still-affordable prices globalpropertyguide.com globalpropertyguide.com. This influx provides additional demand momentum. Looking ahead, Poland’s strong economy (projected ~3–4% GDP growth) and housing deficit (especially in fast-growing cities like Warsaw and Kraków) point to continued price and rent growth. The government’s policy changes (e.g. sudden subsidy schemes or regulations) can introduce volatility globalpropertyguide.com, but overall the medium-term outlook is positive, with Poland often cited as a top opportunity market for international real estate investors in Europe.

Commercial Real Estate Trends: Sectoral Shifts and Cautious Optimism

The commercial property sector in Europe has been navigating a challenging adjustment and is now poised for a gradual recovery. The interest rate shock of 2022–23 led to a repricing of assets (higher yields, lower valuations) and a slump in investment volumes in 2023. In 2024, sentiment started to improve, and 2025 is expected to bring further stabilization and selective growth across sectors. The overarching theme is a “flight to quality”: occupiers and investors are favoring high-quality, future-proof assets (whether offices with modern amenities or logistics facilities in prime locations), while lower-tier properties see weaker demand. Meanwhile, some commercial segments that were battered by the pandemic (e.g. retail, hotels) are finally in recovery mode, and “alternative” sectors (like data centers, life sciences, student housing) are gaining prominence. Below we break down trends in major sectors: office, retail, industrial/logistics, hospitality, and emerging niches.

Offices: Europe’s office markets are cautiously improving after the pandemic-induced upheaval and the remote-work revolution. Office leasing demand is recovering, though it remains below pre-2020 levels in many cities. Supported by rising office-based employment and more stable office attendance rates, 2025 should see a further uptick in leasing volume – CBRE forecasts a 5–10% increase in leasing activity in 2025, edging closer to historic averages mediaassets.cbre.com mediaassets.cbre.com. Indeed, after large corporates spent 2021–2023 rethinking their space needs, a clearer picture of “hybrid work” is emerging, and companies are again making long-term occupancy decisions. Office attendance has improved – over 60% of companies report average attendance of 40–80% (up >10 points from last year) and many expect to push it higher, which in turn supports space demand mediaassets.cbre.com. As a result, vacancy rates are beginning to peak and even decline in some cities in 2025, after climbing in previous years mediaassets.cbre.com mediaassets.cbre.com. Any vacancy compression is mostly in top-tier buildings, however, and overall vacancy remains elevated in certain markets (e.g. parts of Paris, secondary German cities).

The key trend is a polarization of quality. Occupiers are consolidating and often downsizing their portfolios, but prioritizing high-quality, energy-efficient, well-located offices (“Grade A” space). This flight-to-quality means newer or recently retrofitted buildings with great amenities are enjoying strong demand and even rent growth, while older, unrenovated offices languish. Landlords of secondary offices face pressure to refurbish or repurpose those assets. As one industry CEO put it, the need to provide high-quality work environments is driving a wider yield spread between prime and poorer assets mediaassets.cbre.com mediaassets.cbre.com. In 2025, prime office rents in supply-constrained city centers could see modest increases (supported by low vacancy of quality space), whereas secondary stock sees flat or falling rents. New development of offices has slowed (given high construction costs and financing issues), which ironically helps the vacancy situation – with fewer new completions, markets can absorb existing empty space gradually.

Investor sentiment toward offices, while still cautious, is improving from 2023’s trough. Offices traditionally form the largest share of real estate investment, and though many institutional investors were on the sidelines last year, there’s growing appetite for core-plus or value-add office deals at corrected prices mediaassets.cbre.com. Debt availability for offices has also returned, with lenders more willing to finance good assets (albeit at lower loan-to-value ratios) mediaassets.cbre.com. For prime offices in particular, valuations may start to stabilize in 2025 as interest rates stabilize and buyers and sellers reach agreement on pricing. We expect transaction volumes for offices to pick up moderately in 2025, focusing on assets with strong tenant demand or those ripe for repositioning (e.g. older offices to be converted to green, modern space). That said, the office sector’s recovery will be gradual and uneven: headwinds include ongoing portfolio downsizing (many firms are still shrinking their footprint by 10–20% as hybrid work continues) and economic uncertainty making occupiers cautious about expansions mediaassets.cbre.com mediaassets.cbre.com. Additionally, obsolescence risk looms large – buildings that cannot meet new energy standards or tenant expectations will struggle to attract occupants or investors (more on ESG impacts later). In summary, 2025 should bring a modest uptick in office leasing and investment – a turning of the tide – but the sector’s next growth cycle will be defined by quality differentiation and perhaps fewer total square meters needed per employee than in the past.

Retail: After a prolonged slump, Europe’s retail real estate sector is finally showing signs of life. Brick-and-mortar retail had been hit by e-commerce competition and then pandemic lockdowns, which drove up vacancies and forced rent reductions in 2020–2022. However, as consumer habits normalize and investors adjust to the new landscape, confidence is returning. 2024 saw retail footfall and sales improve, especially in segments like luxury high streets and retail parks. By 2025, retail investment is poised for a comeback: notably, large prime shopping centres – once shunned – are back on the radar. According to CBRE, 2025 is expected to see the return of major transactions for dominant shopping centers, as their pricing now looks attractive relative to other property types mediaassets.cbre.com. In the U.S., several big mall deals have already occurred, and that optimism is spreading to Europe mediaassets.cbre.com. Yields on prime retail assets expanded significantly in 2022–23 (values fell), but this means buyers can now acquire top-quality malls or high street portfolios at a compelling yield spread. As inflation eases and consumer spending stabilizes (EU retail sales are slowly improving), the worst for retail rents seems over.

Indeed, retail rents and occupancy are improving in many markets. Vacancy in prime shopping centers is down from its peak, and retailers are cautiously expanding again, especially discounters, outlet chains, and experiential formats. High streets in major tourist cities (London, Paris, Madrid, Milan) have rebounded as tourism recovered; prime retail rents in some of these locations are rising for the first time in years. In secondary locations, though, challenges remain – poorer shopping centres may need repurposing (to mixed-use or logistics) as retail demand won’t fully return to pre-online levels. The retail recovery is also buoyed by the fact that hardly any new retail space is being built (developers largely stopped mall projects years ago), so existing quality assets face limited new competition.

Investors, particularly value-add and opportunistic funds, have been active in snapping up retail assets at discounts, betting on a cyclical rebound. Now, “core” investors (e.g. institutions) are also re-entering for the best properties. We expect investment volumes in retail to rise in 2025, potentially by double digits, albeit from a low base. Prime retail yields might compress slightly given renewed demand mediaassets.cbre.com. One caveat: retail’s performance is tied to consumer confidence, which is still fragile in Europe. High inflation in 2022–23 eroded purchasing power, and though household real incomes are rising again, consumers remain value-conscious and are saving more cbre.fr. In markets like France, consumer confidence is weak, and a big rebound in spending is unlikely in 2025 cbre.fr, which could cap retail sales growth. Thus, the retail real estate recovery will favor formats that align with new spending patterns – e.g. grocery-anchored centers, retail parks with omni-channel integration, and destination malls offering entertainment that online shopping can’t replace. Overall, retail’s outlook is the brightest it’s been in years, with 2024 likely the low point and 2025 bringing stabilization or growth in rents, plus an uptick in investment transactions for well-located assets mediaassets.cbre.com.

Logistics & Industrial: The logistics real estate sector (warehouses, distribution centers, industrial parks) has been the star performer of the past few years, driven by e-commerce and supply chain reconfiguration. Even it, however, experienced a mild cooldown in 2023 as economic growth slowed and some occupiers paused expansion. Going into 2025, logistics fundamentals remain robust and the sector is expected to resume expansion. Leasing demand for modern warehouses is high, though 2024 saw a temporary dip in take-up (in fact, take-up fell below 2019 levels in 2024 amid a post-pandemic normalization) mediaassets.cbre.com. This lull appears short-lived: CBRE anticipates logistics leasing will increase, particularly in H2 2025, as companies restart postponed expansion plans mediaassets.cbre.com. There are multiple tailwinds: nearshoring and re-shoring trends mean more manufacturing and storage needs within Europe (the war in Ukraine and global trade shifts have pushed firms to shorten supply lines) mediaassets.cbre.com. Also, inventory practices have changed – firms want more buffer stock (“just in case” inventory), which supports warehouse demand.

Vacancy rates in logistics, which in many markets were at historic lows (<5%), ticked up slightly in 2023 due to a wave of new supply. But vacancies should stabilize in 2025 and likely remain low, as the new warehouses delivered get absorbed mediaassets.cbre.com. In fact, developers in some countries (UK, Germany, etc.) have pulled back on speculative construction given higher financing costs, so the pipeline beyond 2024 is thinner. The sector’s rent trajectory is strong: prime logistics rents are forecast to keep pace with inflation in 2025, meaning roughly stable in real terms mediaassets.cbre.com. Many top logistics locations in Europe are seeing mid-single-digit rent growth projections, reflecting persistent demand for the best sites mediaassets.cbre.com. Rent growth may moderate from the double-digit jumps of 2022, but should remain positive.

Investors remain very bullish on logistics. This asset class was the first to see its listed real estate values recover – by late 2024, European logistics REITs were trading near Net Asset Value (having traded at big discounts earlier) mediaassets.cbre.com. That signals confidence. Investor appetite is robust, with a wide range of buyers (institutions, sovereign wealth, private equity) trying to increase their allocations to logistics mediaassets.cbre.com mediaassets.cbre.com. However, opportunities to buy are scarce because owners are holding onto these prized assets. Cap rates for prime logistics did rise in 2022–23 (values fell somewhat), but appear to have largely stabilized by 2024; any further yield compression will depend on interest rates falling more. For 2025, we expect investment volumes in logistics to pick up as well – particularly once there’s clarity on interest rate direction, given so much capital is seeking to enter this sector. One trend to watch is trade policy and nearshoring: Europe’s industrial occupiers are waiting to see what the U.S. does (e.g. potential new tariffs in 2025) and how the geopolitical climate evolves mediaassets.cbre.com. This could affect where companies choose to expand manufacturing or warehousing (for instance, American companies might invest more in EU facilities if tariffs shift supply chains). Additionally, obsolescenceis a factor here too – older warehouses without high ceilings or ESG features might struggle, while state-of-the-art “green” logistics facilities command premium rents. In summary, logistics real estate remains a growth sector, with 2025 likely seeing renewed expansion in occupancy and continued strong investor demand, underpinned by megatrends like e-commerce, supply chain resilience, and nearshoring.

Hotels & Hospitality: The hotel property sector has rebounded strongly from the pandemic, thanks to surging travel demand across Europe. By 2024, many tourist markets (e.g. Southern Europe, Paris/London) had record hotel revenues, and investor sentiment turned positive. 2025 is expected to remain favorable for hospitality real estate. International tourism in Europe is projected to continue growing, and allocations to the hotel sector are increasing among investors mediaassets.cbre.com. Savills and other brokers report that hotels are now seen as offering strong returns, especially as many can adjust room rates upward in inflationary times (hotels have inflation hedging ability by repricing nightly). According to CBRE, the hotel investment landscape in Europe “is expected to remain positive, supported by growing allocations to the sector and strong return prospects” mediaassets.cbre.com. Value-add buyers have been particularly active (snapping up hotels to renovate or rebrand), but core capital is also returning in 2025 mediaassets.cbre.com.

We anticipate increased hotel transaction volume in 2025, including some portfolio deals, as both private equity and institutional investors seek to capitalize on the travel boom. Key markets like Spain, Greece, and Italy (which have heavy leisure tourism) are hotly targeted, as are major business hubs where hotel occupancy is recovering mid-week. There is also interest in alternative hospitality like extended-stay and resort properties. Overall, hospitality offers a growth story through 2025–2028 as travel demand remains on a structural uptrend and the sector’s yields are higher than those of traditional property types, making it attractive for diversification. The main risks would be a global economic downturn hitting travel or energy costs surging again (affecting travel costs), but barring that, the trajectory is positive.

Alternative sectors and emerging niches: Investors are increasingly looking beyond the traditional “big three” (office, retail, industrial) to operational real estate and specialty sectors. The 2025 ULI/PwC Emerging Trends survey found data centres, new energy infrastructure, and residential specialties like student housing rank as the top sectors for investment and development prospects europe.uli.org. These areas tap into secular growth drivers:

Data Centers: Soaring demand for digital infrastructure (cloud services, AI, 5G) makes data centers one of the fastest-growing real estate segments. Across Europe, data center capacity is expanding, though often limited by power availability. Investors are scrambling to enter this space, but opportunities are scarce. CBRE notes competition has grown and many data centers trade in off-market deals; even “powered shell” opportunities (buying warehouses to convert) are seeing bidding wars mediaassets.cbre.com mediaassets.cbre.com. With strong tailwinds and lower borrowing costs, expect data center development and investment to remain very active through 2025–2028. Leading cities (Frankfurt, London, Amsterdam, Dublin, Paris) are seeing the most activity, but secondary markets are emerging too.
New Energy Infrastructure: As Europe pursues decarbonization, real estate linked to energy transition – e.g. battery factories, solar and wind farm land, EV charging hubs, hydrogen production sites – is gaining investor attention. PwC’s survey puts new energy infrastructure near the top for 2025 prospects europe.uli.org. This overlaps industrial real estate, but often involves partnerships with energy firms and long-term leases. It’s an area to watch, though still niche compared to core property types.
Residential Alternatives: Segments like student housing, senior housing, and co-living are on the rise. Europe’s student housing (PBSA) sector is booming as university enrollments grow and there’s chronic undersupply of modern student residences in many cities. Gen Z students expect quality amenities, and investors see strong demand (and often counter-cyclical stability) here mediaassets.cbre.com. Student housing was listed among the top sectors for 2025 by investors europe.uli.org. Senior housing and healthcare real estate also benefit from demographic trends (aging population) and are drawing more institutional capital. These sectors are less sensitive to economic swings and provide diversification.
Multifamily/BTR: While “residential” broadly is not alternative, the institutionally-owned Build-to-Rent (BTR)multifamily sector continues to grow in Europe (especially in UK, Germany, Netherlands, Spain). Many insurers and funds are increasing allocations to rental housing given the strong tenant demand and stable income, and 2025 should see this trend continue. Challenges exist (rent control regulations, for example, can deter investment as seen in the Netherlands), but ESG considerations also favor new BTR projects (they can be built to high efficiency standards). Expect cross-border investment in multifamily to remain significant, particularly with U.S. and Canadian investors buying into European housing portfolios.

In summary, Europe’s commercial real estate in 2025 is characterized by divergence: sectors like logistics, living (housing), and alternatives are leading the recovery, retail and hospitality are in rebound mode, and offices are improving but grappling with structural shifts. Asset quality, location, and ESG credentials are more important than ever in determining winners and losers.

Country-Specific Commercial Market Highlights

Turning to the key country markets in focus – Germany, France, Spain, Italy, Netherlands, Poland – we highlight notable trends in their commercial real estate sectors:

Germany: Europe’s largest commercial market, recalibrating. Germany experienced a significant slowdown in 2023, with investment volumes down and some distress emerging (especially among over-leveraged landlords of offices and residential portfolios). In 2024–25, German offices face a bifurcated outlook. Cities like Berlin, Munich, and Frankfurt still see healthy demand for prime offices (tech and finance tenants expanding cautiously), and prime office rents have held up, even rising in select submarkets. But secondary offices, particularly in less central areas or older stock, see higher vacancies. Nationally, office vacancy crept up to around 6–7% on average, but is now leveling off as few new projects are coming online. Investor sentiment in Germany is cautious due to the economic stagnation and higher financing costs, yet the expectation of stabilizing yields is luring some back. Notably, Germany’s open-ended real estate funds (a major part of its market) had to mark down values in 2023; by 2025 they may start selectively acquiring again at new prices. Logistics in Germany remains very strong – vacancy under 3% in the top hubs (Ruhr, Berlin, Frankfurt areas) and continued rent growth. Many global investors target German logistics despite keen competition. Retail is mixed: high street retail in wealthy southern cities is recovering, but weaker retail in smaller towns still struggles. Overall, Germany’s commercial market in 2025 is one of gradual stabilization – the phrase “slow and bumpy recovery” applies pwc.com. One emerging issue is refinancing: German lenders are more cautious, so 2025–2026 will likely see more assets for sale (especially offices) as loans mature, which could present opportunities for buyers at adjusted prices.
France: Paris at the center of attention. The French commercial market is led by the Paris region, which is undergoing adjustments. Paris offices saw take-up decline in 2024 amid a sluggish economy and corporate caution cbre.fr. The La Défense area in particular has higher vacancy as some occupiers downsized. For 2025, a clear recovery in offices is not expected until possibly late in the year cbre.fr. However, prime Paris CBD offices remain highly valued and low in supply – ESG requirements (like France’s law forbidding rental of low energy-efficiency offices starting 2025) are pushing owners to refurbish or sell non-compliant buildings, which will be a major theme. Logistics in France had a banner 2021–22 but cooled in 2023; now a wait-and-see approach prevails among occupiers, and vacancy is inching up with new supply cbre.fr. There is an “ongoing increase in available stock” in some French logistics markets as demand paused, so 2025 may be a year of absorption rather than rent growth cbre.fr. Still, long-term drivers (e-commerce, 1-day delivery, etc.) support French logistics, especially around Paris and Lyon. Retail in France – high street shops in Paris have benefited from returning tourists (Americans taking advantage of a favorable euro, etc.), and luxury retailers are expanding. But generally, French retail sales are underwhelming due to weak consumer confidence cbre.fr. So retail rents likely stay flat in 2025, except for prime locations. Overall investment in France was at a low in 2024; it should stabilize and slightly increase in 2025 cbre.fr. France’s large institutions (like insurers) who paused acquisitions might resume if pricing is right. ESG is a major focus – France is among the first to implement new reporting (CSRD) for climate plans, which will heavily influence investors’ decisions on French assets cbre.com cbre.com.
Spain: Bright spot with broad recovery. Spain’s commercial real estate is buoyed by its strong economy and investor appetite for higher yields. Madrid and Barcelona are ranked among the top cities for investment prospects in 2025 (Madrid was even named #2 in Europe by ULI/PwC) europe.uli.org. Offices: Madrid’s office market is seeing solid leasing activity; vacancy is around 9–10% and trending down as no major new supply is coming. Rents in prime Madrid and Barcelona have nudged up and could rise further given limited Grade A space. Logistics: Spain’s logistics sector is thriving – take-up around Madrid and in Catalonia remains high, and international groups are buying into Spanish logistics platforms (often attracted by yields higher than in Germany/France). With Spain’s consumption and exports growing, expect continued demand for warehouses; developers are active, but land around big cities is finite, helping keep vacancy low. Retail: Spain’s retail has recovered strongly thanks to tourism and consumer spending – retail footfall is back, and even secondary shopping centers have seen vacancy fall. Investors including U.S. and European private equity are targeting Spanish retail assets for value-add plays, anticipating further economic growth. Hotels: Perhaps the crown jewel – Spain’s hotel occupancy and rates are at record levels in many resort areas and cities, and multiple hotel deals are happening (some family-owned hotels selling to funds at attractive yields). With tourism expected to grow, hospitality real estate in Spain is a hot sector for 2025. In sum, Spain is seen as a growth market, drawing cross-border capital, and its commercial sectors from offices to hotels are in expansion mode, albeit mindful of global economic risks.
Italy: Selective opportunities in a stable market. Italy’s economy is growing slowly (~0.8–1.0%), and its real estate market tends to lag more dynamic peers. Milan remains the standout – it’s the finance and fashion capital, attracting most office and mixed-use investment. Milan’s office vacancy is low (~4-5%) and prime rents have risen to record highs as tech and finance firms compete for limited Grade A space. Several new office projects in Milan’s Porta Nuova and CityLife areas are coming online and leasing well (often pre-let). Rome’s office market is smaller and more government-driven, relatively steady but without the rent growth of Milan. Logistics in Italy is on the rise: northern Italy (Lombardy, Veneto) and routes to Rome/Naples have seen a surge in warehouse demand as Italy’s e-commerce grows from a low base. Modern logistics stock is expanding, supported by investors like Prologis and Logicor; however, some concerns about Italy’s infrastructure and bureaucracy keep yields a bit higher, which is attractive to yield-seeking investors. Retail: Italy still has a strong culture of brick-and-mortar retail, and while many secondary high streets have vacancy, the prime luxury streets in Milan (Via Montenapoleone) and Rome are extremely strong, with top global retailers paying record rents (driven by tourist spending). Secondary shopping centers are stable if anchored by groceries. Hotels: Italian hotels, especially luxury and resorts in Tuscany, Amalfi, etc., are in huge demand from international buyers (high-net-worth individuals, luxury brands). We anticipate more trophy hotel transactions in 2025. The main challenge in Italy is the cautious lending environment and political risk – but with the current government relatively pro-development, some reforms (like speeding permits) could gradually help. Italy’s real estate outlook is stable with pockets of growth (Milan offices, logistics, hotels) and should see moderate investment volume growth in 2025 as some international investors increase their exposure (given Italy’s yields are higher than core countries).
Netherlands: Small country, big investment interest. The Netherlands punches above its weight with global investors due to its transparency and strong fundamentals. Amsterdam offices have a low vacancy (~7%) and tech and financial firms continue to seek premium space; however, Amsterdam imposed a ban on new office construction in some areas to encourage housing, which, while limiting supply, could cap long-term office growth. Still, in 2025, office rents in Amsterdam might rise slightly for prime space due to scarcity. Secondary Dutch cities like Rotterdam and Eindhoven have more vacancy and will see stable rents. Logistics: The Netherlands is a logistics powerhouse (Rotterdam port, Schiphol airport). Warehouse space around these hubs remains in very high demand, and even though a lot of new stock was built in 2020–22, it’s being absorbed. Land and permits for logistics have become harder to get (partly due to environmental “nitrogen” permit issues), so supply is constrained. Expect logistics rents to hold firm or rise with inflation, and investors to continue snapping up Dutch logistics assets – many Asian and North American investors particularly like this sector. Retail: Dutch retail sales have been decent, and the country’s shopping centers largely adapted to omni-channel models. The high street in Amsterdam is supported by tourism (some rental growth at the luxury end); local shopping centers are stable as consumer spending is steady. The big story in the Netherlands is the residential sector regulation – with the Affordable Rent Act extending rent control to more units, many buy-to-let investors are selling. This could actually provide a boon to retail and other sectors, as domestic investors reallocate capital. Investment outlook: The Netherlands in 2025 should see active investment flows, with international capital drawn to its liquidity. The favorable euro-dollar rate also makes Dutch assets cheaper for U.S. investors cbre.com. All sectors – office, industrial, residential, retail – will see interest, but logistics and residential (despite regulation, the long-term housing story is compelling) will likely lead. ESG plays a big role in the Dutch market too, as the country has strict sustainability targets influencing building design and retrofits.
Poland: Growth and yields in Central Europe. Poland is the largest CE market and seen as the most institutionally mature in the region. Warsaw’s office market had elevated vacancy (~11–12%) after a wave of new deliveries and some downsizing by multinationals, but 2024 saw record leasing as companies (especially in IT, business services) expanded. By 2025, with almost no new supply coming (development paused in 2023), Warsaw’s vacancy will likely decline and prime rents could tick up. Regional Polish cities (Kraków, Wrocław) have active office markets too (driven by BPO/tech firms) – they have lower rents and are attractive for cost-conscious tenants. Industrial/Logistics: Poland has been a magnet for logistics, serving both its large domestic market and as a distribution hub to Germany and Eastern Europe. Vast amounts of modern warehouses were built (especially around Warsaw, Łódź, and Upper Silesia), and Poland now rivals Germany in annual take-up. Demand is still high, though 2023 saw a slight dip; 2025 is expected to bring renewed expansion as companies nearshore manufacturing (some relocating from Asia to Poland to serve Europe). With land and labor costs lower than Western Europe, Poland’s logistics boom should continue, and investors are very active – yields in Poland are higher (cap rates ~5-6% for prime logistics, vs 3.5-4% in Germany), drawing many foreign investors. Retail: Poland’s retail sector recovered with consumer spending (which is rising with wage growth). Modern shopping malls in Warsaw and other large cities report high occupancy and increasing footfall. Retail sales have been volatile due to inflation, but essentials-based retail parks are thriving. International retail chains continue to expand in Poland, underscoring confidence. Investment flows: Poland is often cited as the most attractive market in CEE for international investors lexology.com. 2025 should see more capital inflow – already, many U.S. and European funds established partnerships or platforms in Poland (especially in logistics and residential rental). Cross-border investment is facilitated by Poland’s stability and growth; however, currency risk (złoty volatility) and political changes can be considerations. The October 2023 election led to a new pro-EU government which could improve investor sentiment further. In summary, Poland’s commercial real estate outlook for 2025–2028 is strong growth – it offers a combination of yield and growth that’s hard to find in core EU, albeit with slightly higher risk. We expect increasing cross-border deals in offices (as companies diversify from expensive Western capitals), logistics (for pan-European portfolios), and even PRS residential (as institutional renting develops).

Investment Flows and Capital Markets

After a tough 2023, Europe’s real estate capital markets are gearing up for a gradual recovery in investment activity in 2025. The past year was defined by a wide bid-ask spread – sellers reluctant to drop prices and buyers demanding higher yields in the face of expensive debt. This stalemate led to markedly lower transaction volumes. Now, with interest rates stabilizing and property values having adjusted downward (10–30% value corrections in some segments), buyers and sellers are finding more common ground. Indeed, the bid-ask spread is expected to converge further in 2025, unlocking more deals cbre.com cbre.com. A key driver is simply more motivation to transact: more product is coming to market as owners under pressure (loan maturities, fund redemptions, etc.) decide to sell assets, and improved financing availability enables buyers to step in cbre.com cbre.com. Highly leveraged owners and open-end funds facing withdrawals will be among the more motivated sellers, while long-term holders can wait cbre.com cbre.com. This increase in assets for sale, combined with slightly cheaper debt, should result in higher investment volumes in 2025. Forecasts by market analysts predict European commercial real estate investment volumes could rise on the order of 10–15% in 2025 (versus 2024), and accelerate further in 2026.

That said, the recovery in investment will be gradual and uneven. With interest rates likely to remain above pre-pandemic lows, there is limited room for significant price re-inflation – buyers will remain disciplined on pricing, and value growth will be measured cbre.com cbre.com. Prime assets in favored sectors (e.g. prime logistics, residential, trophy offices) may see yield compression again by late 2025 as competition pushes prices up slightly cbre.com cbre.com. However, secondary assets or those with challenges (short leases, capex needs) may still trade at discounts. The overall return outlook for European real estate is improving, however. With bond yields off their peaks and property yields adjusted upward, the spread is reasonable again. CBRE notes that positive leverage is achievable once more, meaning an investor can finance an acquisition at a cost of debt that is below the property yield in some cases cbre.com. This fundamental re-opening of the debt-equity arbitrage will help draw capital back into the market.

One of the most encouraging trends is the anticipated return of international capital in 2025. Over 2022–2023, cross-border investment had slowed, with many US and Asian investors holding off due to currency volatility and uncertainty. Now, conditions are turning more favorable: the euro has weakened against the dollar, making European assets cheaper in USD terms, and borrowing costs within Europe have come down relative to late 2022 cbre.com. This is expected to entice overseas investors to reallocate to Europe. Notably, some large North American and Middle Eastern investors see European real estate offering good relative value now (especially as the US market has its own issues in offices). Capital “on the sidelines” is significant – there is a lot of dry powder in private equity real estate funds globally, much of which is earmarked for opportunistic or value-add plays in markets like Europe cbre.com. These investors don’t want to miss the window before values start rising again; many will move in 2025 to acquire assets at the bottom of the cycle. We expect cross-border investment patterns such as: increased North American investment in European logistics and residential portfolios (a trend already underway), continued Middle Eastern sovereign wealth fund interest in landmark London and Paris assets (e.g. office towers, hotels), and intra-European flows (German, French funds buying in Spain, CEE etc. for yield pick-up).

Data from JLL shows that in early 2025, EMEA real estate transaction volumes were up over 40% quarter-on-quarter as sentiment improved jll.com. If this trajectory holds, 2025 could mark the beginning of a new up-cycle. Savills Research similarly projects that Europe’s investment volumes will rise ~13% YoY in 2025 and a further 25% in 2026as the recovery gains momentum (albeit these figures vary by report). The capital rotation is interesting: during the downturn, domestic investors dominated (local players who knew their markets well continued to buy selectively). As the market recovers, global investors will likely account for a larger share of purchases, reasserting pre-2020 patterns of high cross-border activity in Europe.

It’s also worth noting the shifting financing landscape. Banks in Europe have become more conservative with real estate lending, especially for offices and development projects. This has opened space for alternative lenders – private equity debt funds, insurance companies, etc. – to step in. In 2025 and beyond, non-bank lenders are expected to gain market share in real estate finance pgim.com. They can often offer more flexible terms, albeit at higher rates. This is particularly important for refinancing the wall of 2025–2026 maturities. Many assets bought at peak low yields will struggle to refinance at today’s higher interest rates without additional equity. We may see an uptick in joint ventures, recapitalizations, or sales as a solution. However, overall systemic risk appears contained; European banks have smaller real estate loan exposures compared to the last crisis and have been provisioning conservatively.

In terms of geographic preferences of investors: surveys for 2025 show London, Madrid, Paris as the top city targets in Europe europe.uli.org – London for its liquidity and repriced market (post-Brexit and yield expansion, it looks attractive), Madrid for growth and relative value, Paris for long-term stability and scale. Other cities like Berlin, Milan, and the major Dutch cities also rank highly. There is also increasing interest in secondary cities with strong fundamentals (e.g. Munich, Dublin, Lisbon, Warsaw) as investors widen their search for returns.

Sector preferences of investors have already been discussed (logistics, residential, alternatives favored; office selective; retail cautiously coming back). Many investors are now segmenting their strategies by risk profile more clearly: core funds focusing on prime assets in top cities (taking advantage of price dips there), while opportunistic funds target distress or redevelopment opportunities (for example, buying an old office at a deep discount to convert into residential or life sciences lab space). The theme of “repurposing” is big – we expect a wave of capital deployment into converting obsolete properties (especially offices and retail) into new uses, which serves both as an investment strategy and a partial answer to oversupply in those segments.

In conclusion, Europe’s capital markets in real estate for 2025 are set for a rebound, driven by improved financing conditions, plenty of available capital, and the perception of a market bottom. Risks like slow economic growth or inflation surprises could dampen the recovery cbre.com, but the general sentiment has shifted to one of cautious optimism. As one industry leader noted, after navigating storms of inflation and rates, the sector “has a landing zone in sight”, even if geopolitics and ESG demands pose ongoing challenges europe.uli.org. The mood is optimistic but with caveats – every deal is scrutinized carefully, and only the best opportunities are chased aggressively.

Outlook 2025–2028: Risks, Opportunities, and Transformative Trends

Looking beyond the immediate horizon, the period 2025 to 2028 will be formative for the EU real estate market. Stakeholders are watching several key trends and risks that will shape the industry’s trajectory in the medium term. In this section, we discuss the forward-looking outlook, including potential risks, areas of growth opportunity, the intensifying focus on sustainability/ESG, and evolving cross-border investment patterns.

Economic and Market Risks

While the base case is for steady improvement, there are notable risks that could derail or delay the real estate recovery:

Interest Rate and Inflation Risk: If inflation proves sticky or new shocks (e.g. an oil price spike) occur, central banks might halt rate cuts or even hike again. Real estate markets are counting on gently falling rates in 2025–2026; any reversal would hit sentiment and property values quickly. Additionally, even as rates fall, they may stabilize at levels higher than the ultra-low 2010s. This new normal means cap rates/yields likely won’t compress to previous lows, limiting capital value upside. Positive scenario: inflation keeps decelerating and by 2026 interest rates settle near historical averages (~1–2% ECB rate), creating a benign environment for property.
Economic Growth and Occupier Demand: Europe’s growth prospects, while improving, are modest. A lot hinges on avoiding recessions. Risks include a sharper slowdown in China (hitting European exports), a U.S. recession, or domestic issues like a resurgence of sovereign debt concerns. If growth underperforms (say Eurozone growth languishes under 1% through 2026), occupier demand for space (especially offices and retail) could remain weak. Already, slow growth is a risk cited for hampering the recovery in investment cbre.com. Upside potential: fiscal stimulus or unexpected tech-driven growth could boost EU economies beyond forecasts, lifting demand for all property types.
Geopolitical Uncertainty: The war in Ukraine remains a wildcard – an escalation or prolonged conflict can affect investor confidence and certain markets (CEE countries are more exposed, though Poland has actually benefited economically from relocation of businesses out of Ukraine/Russia). Furthermore, global tensions like a potential trade war between the U.S. and China (especially if U.S. politics change) could affect Europe’s export industries, with knock-on effects on industrial property demand mediaassets.cbre.com. Europe also faces internal political shifts (a wave of elections in 2024–2025) that could change policies relevant to real estate (e.g. more left-leaning governments might impose rent controls or tenant protections; more right-leaning could reduce regulations but increase uncertainty as seen with recent populist surges). The period up to 2028 will have important elections (European Parliament 2024, Germany 2025, etc.), each adding some uncertainty in the short term.
Financial System and Liquidity: Real estate is grappling with tighter liquidity after years of cheap money. One risk is the refinancing wall – a large volume of loans and bonds comes due in 2025–2027. If credit conditions don’t improve enough, we could see distress, fire sales, or even defaults, particularly in sectors like offices or in markets like the Nordics (Sweden’s property companies are notably strained). While this presents opportunities for some (distressed asset buyers), it could also lead to price overshooting on the downside. So far, banks and regulators seem confident it’s manageable, but it bears watching. On the flip side, the growth of private debt funds means even if banks pull back, alternative capital can fill part of the gap.
Development and Construction Costs: Construction costs remain high (materials, labor), and although they stabilized in 2024, they could rise again due to supply chain issues or energy prices. If costs don’t come down, many development projects remain infeasible, constraining supply. That’s good for owners of existing assets in the short run, but bad for overall real estate sector growth and for economies that need new housing/infrastructure. Strict environmental regulations (e.g. limits on construction due to climate concerns) also add to costs or cause delays (the Dutch “nitrogen crisis” halting projects is a prime example). A potential risk is underbuilding leading to even worse affordability for housing and shortages in prime office/industrial space – essentially a supply crunch. Conversely, if costs unexpectedly drop (or technology improves efficiency), we could see a mini boom in construction later, alleviating some shortages.
Occupier Behavioral Shifts: Trends like remote work and e-commerce are longer-term forces that could further change real estate usage. The full extent of hybrid work is still playing out – by 2028, if companies settle into e.g. 50% office attendance norms, the office space needed per employee may permanently shrink, meaning higher vacancy or conversion of obsolete offices to other uses. Similarly, online retail could take another leap (maybe via new technologies like AR shopping or just generational change), which might challenge retail demand beyond what’s currently anticipated. Real estate players will need to stay agile to repurpose and retenant spaces as needed.

In summary, risks are tilted towards the macroeconomic and geopolitical side in the medium term. The consensus expects a muddling-through scenario, but any deviations (high inflation, low growth, or shocks) would test the resilience of the real estate recovery. The industry is aware of these caveats – as noted, **there are “caveats at every turn” despite the cautious optimism in the sector europe.uli.org europe.uli.org. Real estate leaders are thus keeping a close watch on “the five D’s” mentioned by one institutional chief: debt, demographics, decarbonisation, deglobalisation, and digitalisation europe.uli.org europe.uli.org – essentially the risks and drivers discussed above.

Growth Opportunities and Strategic Outlook

Despite the risks, there are significant growth opportunities for those positioned correctly. Some of these opportunities arise directly from the challenges above – for example, refurbishment and redevelopment of older properties is poised to be a booming business. With so many office buildings needing upgrades to meet ESG rules, companies specializing in adaptive reuse or retrofitting will find plenty of work (and investors can generate returns by turning “brown” buildings “green”). The period to 2028 could see thousands of offices and retail spaces across Europe converted into apartments, labs, student housing, or other uses. This not only addresses oversupply in one segment but also supply shortages in another (e.g. turning empty offices into much-needed housing in city centers).

Another opportunity is in technology integration in real estate. The industry has historically lagged in tech, but that’s changing. The rise of PropTech and use of AI, IoT, and data analytics to optimize building operations, marketing, and investment decisions is accelerating. As per PwC’s survey, 85%+ of respondents expect AI to have some or a large impact on all areas of real estate over the next five years pwc.com pwc.com. Already, AI is being used for predictive maintenance, tenant churn prediction, and market analysis pwc.com pwc.com. Embracing these technologies can improve efficiency and returns – e.g. AI can help hotels dynamically price rooms, or help landlords identify which tenants might renew or relocate. Real estate firms that invest in digital transformation will likely outperform. Europe could also see growth in smart buildings and smart cities initiatives, aligning with the EU’s digital and green agendas, offering investment avenues in tech-enabled infrastructure.

Demographic and social shifts also present opportunities. The aging population creates need for senior housing, medical office buildings, and nursing care facilities – a sector likely to expand strongly by 2028. Urbanization and the preference of young professionals for renting in vibrant city centers supports the growth of institutionally managed private rented housing (build-to-rent) and co-living spaces. Meanwhile, student housing (as mentioned) is in expansion – markets like Germany and Italy have relatively low provision rates of PBSA, so investors are funding new developments there. Life sciences real estate (labs, R&D hubs) is another niche on the rise, especially after the pandemic highlighted pharma and biotech. Cities like Boston and Cambridge in the US boomed with lab space; Europe is following suit in places like Cambridge UK, Amsterdam, and Berlin. Expect specialized funds to pour more money into life science campuses near universities and hospitals.

Geopolitically, Europe is positioning to benefit from “friendshoring” and industrial reconfiguration. With global companies seeking alternatives to Asia, Europe (particularly Eastern Europe) stands to attract manufacturing of EV batteries, semiconductors (with EU’s Chips Act support), and other high-tech manufacturing. Each new factory or plant brings along real estate needs: worker housing, logistics, offices, etc. Poland, for instance, has attracted major investments in battery factories; these bolster local real estate markets. The same for the car industry transition to electric – production plants being built in Germany, France, Spain for EVs will have spillover effects. Real estate investors might find opportunities in providing infrastructure around these projects, be it warehouses, training centers, or even community retail for new worker populations.

Cross-border capital flows themselves can create opportunities. If, as expected, Asian capital (e.g. from Singapore, South Korea) and North American capital surges back into Europe, local market participants might benefit from partnering with these entrants. We could see more joint ventures where foreign capital teams up with local developers (who have the know-how) to pursue projects, whether it’s residential in Poland or logistics in Spain. Cross-border investment also tends to compress yields (increase values) in the target markets, so for example, if U.S. investors en masse decide German residential is a safe haven, they could drive up prices there, rewarding early movers.

Finally, government initiatives could unlock growth areas. The EU and national governments are investing heavily in green energy and infrastructure – from railways to EV charging networks to retrofit subsidies. Real estate related to these (transit-oriented developments, EV charging station real estate, etc.) may not have been traditional, but they present new categories of investable assets.

In sum, while traditional buy-and-hold of office or retail is no longer a sure bet, the 2025–2028 landscape offers transformative growth opportunities in repurposing assets, embracing proptech, targeting demographic-driven segments, and aligning with Europe’s broader transitions (digital and green).

Sustainability and ESG Trends

One of the most profound shifts in European real estate is the embedding of sustainability and ESG (Environmental, Social, Governance) considerations into every aspect of the industry. By all indications, this trend will only intensify through 2028, fundamentally influencing asset values, tenant demand, and investor strategy. In fact, industry surveys show ESG compliance is viewed as the biggest challenge in both the short and long term for real estate europe.uli.org europe.uli.org.

Several regulatory developments are converging from 2024 onward:

The EU’s Corporate Sustainability Reporting Directive (CSRD) requires large companies to start reporting detailed ESG metrics from fiscal year 2024 (with first reports in 2025) cbre.com cbre.com. This includes real estate firms and also tenants (many tenants now must disclose the footprint of their leased spaces). The European Sustainability Reporting Standards (ESRS) will make sustainability reporting far more rigorous cbre.com. Real estate owners will be under pressure to demonstrate clear climate transition plans and performance.
The proposed Corporate Sustainability Due Diligence Directive (CS3D) will require companies to not only disclose but actively implement plans to meet climate targets cbre.com cbre.com. For property investors, this means publicly committing to and executing carbon reduction strategies for their portfolios, such as retrofitting buildings to align with a Net Zero Carbon pathway cbre.com.
Basel IV banking regulations, coming into effect around 2025, include higher capital charges for banks on certain real estate loans. If banks assign higher risk weight to “brown” inefficient buildings, financing costs for those could rise cbre.com. This adds another incentive for owners to improve sustainability to maintain asset liquidity.
At the asset level, many countries are tightening building energy codes. For example, the EU Energy Performance of Buildings Directive (recast) under negotiation could set minimum energy performance standards for existing buildings (e.g. by 2030, buildings must meet certain ratings or cannot be leased). France already has a law: rentals with the worst energy labels (G) are banned from 2025, effectively forcing upgrades or removal of those units from the market deepki.com. The Netherlands and others have mandates like offices needing at least EPC label C to be let. These regulations mean assets that don’t comply will lose income and value – a phenomenon of stranding. As CBRE notes, “assets failing to comply with sustainability standards are likely to suffer downward repricing, due to the scale of investment required” to fix them cbre.com.
The investor community is also self-regulating: initiatives like the Net Zero Asset Owners Alliance and others commit funds to decarbonize portfolios by 2050. Already, some large investors won’t buy properties that don’t meet certain ESG criteria, effectively shrinking the buyer pool for non-compliant assets.

The upshot is that ESG factors are directly affecting asset valuations and leasing. Buildings with strong sustainability credentials (think energy-efficient HVAC, solar panels, green certifications like BREEAM/LEED, healthy indoor environments, etc.) enjoy higher demand, stickier tenants, and even rent or value premiums. Studies show green-certified offices command rental premiums on the order of 6% or more over non-certified peers exquance.com. They also tend to have lower vacancy and better tenant retention. This stable cash flow and future-proofing leads to yield compression on green assets – investors accept lower cap rates because they view the income as more secure cbre.com cbre.com. In contrast, older high-carbon buildings face higher cap rates and lower liquidity. We’re seeing this brown discount emerge across Europe; by 2028 it could widen significantly. For example, by some estimates, London offices with poor EPC ratings trade at noticeably higher yields than comparable efficient ones – a trend likely to spread widely.

ESG is not just E (environmental): the Social component is visible in affordable housing mandates, community impact, and tenant well-being trends. We might see more public-private partnerships for affordable housing development as governments push for social value (some cities already require certain % of affordable units in new schemes). Developers emphasizing community amenities, wellness certifications, etc., may gain an edge with occupiers. Governance, too – transparency and good corporate governance – is now scrutinized by investors and lenders (the days of opaque JVs or weak risk controls are ending for firms seeking capital).

However, there is also an ESG backlash or debate in the industry. PwC’s report noted that in 2024, ESG fell behind traditional concerns like tenant demand and financial health as a primary influence – some in the industry are questioning the cost/benefit of aggressive ESG action pwc.com pwc.com. When profit margins are tight, spending heavily on sustainability upgrades can be daunting. Also, the lack of clarity around evolving standards is an issue – people worry that what’s considered “sustainable” now might change in 20 years pwc.com. Despite this, regulation is forcing the issue– a striking 74% of real estate professionals said regulation is the main issue affecting their business in 2024 pwc.com, much of that being ESG regulation. In response, the more proactive firms are moving from talk to action: investing in renewable energy for their buildings, rolling out AI for energy management, disclosing climate risks in line with TCFD, etc. By 2028, ESG compliance won’t be optional – it will be a baseline. Firms that adapt early could reap benefits (via lower operating costs, better financing terms – some banks offer “green loans” at slight discounts, and stronger tenant relations). Those that lag may face higher cap ex later and value impairment.

Insurance and physical climate risk is another ESG facet. Insurers are hiking premiums or even withdrawing coverage for assets in high-risk areas (flood zones, wildfire-prone areas). PwC highlighted growing concern about access to insurance as climate risk grows pwc.com. Properties in coastal or climate-exposed locations may require resilience investments (sea walls, drainage, etc.). By 2028, climate risk analysis will likely be standard due diligence for property acquisitions, and could impact lending (banks might factor climate risk into loan terms).

In summary, the sustainability trend is a defining theme for the EU real estate outlook. Expect to see:

Massive retrofit initiatives: The EU building stock is old; retrofitting offers both a challenge and a trillion-euro investment opportunity. Projects to install energy-efficient systems, insulation, and even timber structural renovations will be common.
Green leases and tenant collaboration: Landlords and tenants working together to reduce energy use – e.g. sharing data, green lease clauses where tenants commit to sustainable practices.
Innovation in materials and design: More timber construction, recycled materials, modular construction to reduce waste and carbon, etc., spurred by ESG goals.
Differentiation in finance: Green bonds, sustainability-linked loans (with interest tied to hitting ESG targets) will be more prevalent. Already, the first half of 2023 saw a high volume of green real estate bonds in Europe. This gives an advantage (cheaper capital) to ESG leaders.
Public sector leadership: Government and EU institutions might invest directly in exemplary sustainable developments (for instance, the EU’s Renovation Wave initiative aims to double renovation rates by 2030). Also, cities might impose stricter local rules beyond national ones (e.g. city-level carbon taxes on buildings).

Overall, the push for Net Zero Carbon by 2050 across Europe means the real estate sector has to transform over the next 25 years – the years 2025–2028 will be critical early innings of that transformation. Already in 2025, investors must disclose climate transition plans and start implementing them cbre.com cbre.com, so by 2028 we should see meaningful progress. Those assets and companies that meet the challenge could see enhanced value and “greater cash flow stability” cbre.com cbre.com, while laggards may find themselves obsolete or heavily penalized.

Cross-Border Investment Patterns

By 2028, we anticipate a more globalized and interconnected European real estate market – albeit one shaped by the forces of deglobalisation in some respects (e.g. more intra-Europe trade vs dependence on distant markets). Cross-border investment will likely regain or exceed pre-pandemic levels. Some patterns to expect:

North America to Europe: North American investors (pension funds, private equity, REITs) will continue to be major players in Europe. The scale of their capital often dwarfs local players, enabling big portfolio acquisitions. We foresee U.S. and Canadian groups increasing allocations to Europe due to diversification and occasionally better pricing. For example, if U.S. offices remain troubled but European offices have rebounded, capital may flow accordingly. The strong dollar (if it persists) is a bonus for them cbre.com. Cross-border M&A might occur too – European property companies could be targets for North American ones (as we saw Brookfield and others take stakes in UK and German firms).
Asia/Middle East to Europe: Capital from Asia (e.g. Singaporean sovereign funds, Korean pensions) and the Middle East (Saudi, UAE, Qatari funds) has been and will be extremely influential. Middle Eastern investors in particular often go for trophy assets (London skyscrapers, Paris landmarks, etc.) and that likely resumes full force by 2025–2026 because those regions have cash from high oil revenues to deploy. Asian investors might focus on logistics, tech sectors, or prime offices in gateway cities. One change: Chinese outbound investment is much reduced due to China’s domestic situation, so the void is filled by others (like Singapore’s GIC, which has been very active in European logistics and student housing deals).
Intra-European flows: European investors will also increasingly invest across borders. For instance, German funds are traditionally big buyers of office and retail across the EU (they will likely re-emerge once their fund outflows stabilize). French investors could look to Spain or Italy, Nordic investors might pick up assets in the Baltics, etc. Additionally, with the UK outside the EU now, some EU investors who avoided UK due to Brexit uncertainty might venture back for high yields (and vice versa, UK investors into EU). By 2028, the relationship between UK and EU real estate could normalize, with London still a magnet for EU money and European cities attracting UK funds seeking growth.
Cross-Border Development and JV ventures: It’s not just acquisitions – foreign capital will fund development projects as well. Middle Eastern and Asian partners might co-develop large mixed-use projects in Europe’s cities. For example, a North American fund might partner with a local developer in Poland to build a portfolio of rental apartments – combining capital with local expertise. These JVs bring best practices and help modernize markets.
Diversification of targets: Initially, cross-border money goes to core markets (UK, France, Germany). But increasingly, they are diversifying to “next-tier” markets for better yields or growth: e.g. Poland, Spain, Netherlands, Ireland, Portugal, even some Southeast Europe. We might see, by 2028, institutional-grade investment in places like Greece or Bulgaria as those economies integrate further and if yields are appealing.

It’s worth noting cross-border investment can make markets more correlated. If global sentiment sours, cross-border investors tend to all pull back simultaneously, exacerbating downturns (as seen in 2008 and 2020). Conversely, when sentiment is good, they can flood a market with capital, boosting prices quickly. Local players will need to be nimble – potentially partnering or timing their plays with these flows.

A positive aspect of cross-border activity is it spreads innovation and standards. International investors bring ESG expectations (many North American and European institutional investors share similar ESG goals now), which helps propagate green standards across all markets they invest in. They also bring operational know-how – for instance, introducing modern property management techniques to a new market.

Cross-border capital is also eyeing alternatives – expect foreign investors to buy platforms, not just assets. For example, a U.S. private equity firm might buy a European student housing operator to get a base. Or an Asian fund might invest in a data center developer. These platform deals can accelerate growth of those sectors continent-wide.

By 2028, Europe may also see more outbound investment – European investors going abroad. Currently, European institutions mostly invest within Europe or in the US. If European markets get too pricey or competitive, they might allocate more to Asia-Pacific or other regions. But given Europe’s need for capital to meet its challenges (housing, climate adaptation, etc.), there will be plenty to absorb locally.

In summary, cross-border patterns will likely revert to high volumes and diverse sources, reinforcing Europe as a major destination for global real estate capital. The interplay of domestic and foreign capital will shape pricing – for instance, if domestic banks restrict lending to certain sectors, foreign equity might scoop up assets at discounts, then benefit when conditions improve. The key will be monitoring currency trends (as these influence flows; a weak euro invites inbound investment, a strong euro could see more outbound) and political climates (investment treaties, taxation on foreign buyers – e.g. Canada and New Zealand introduced foreign buyer bans for housing; if Europe ever did similar in housing that could alter flows, but no indication of broad moves like that yet).

Conclusion

2025 marks an inflection point for the European Union’s real estate market. Both the residential and commercial sectors are transitioning from a period of correction and uncertainty to one of stabilization and selective growth. The macroeconomic environment – characterized by moderate GDP growth, retreating inflation, and the end of monetary tightening – is providing a more solid foundation for real estate activity than the volatile prior years. Residential markets across the EU are broadly recovering, underpinned by fundamental supply shortages and improving credit conditions, though affordability and policy interventions will moderate the pace. Commercial real estate is forging a new path: offices evolving to higher-quality usage, retail finding its footing in an omni-channel world, logistics continuing to benefit from structural tailwinds, and alternative sectors rising to prominence.

Looking ahead through 2028, the outlook is cautiously optimistic. The industry’s leaders largely expect better business confidence and profitability in the coming years pwc.com. However, they do so with eyes wide open to the risks – from economic hiccups to geopolitical shocks – and with an understanding that this cycle will differ from the last. Sustainability and innovation will be the differentiators. Participants who proactively address ESG obligations, retrofit their buildings, and leverage technology will be best positioned to thrive in the new era of European real estate. As one executive summarized, success now hinges on navigating the “5 Ds”: debt, demographics, decarbonisation, deglobalisation, digitalisation europe.uli.org.

Europe’s real estate market in 2025–2028 will likely be defined by transformation: transforming older properties into greener, more usable spaces; transforming cities to be more livable and resilient; and transforming industry practices to be more transparent and data-driven. Investment is set to rebound as global capital flows back into Europe, drawn by both necessity (diversification, underinvestment in recent years) and opportunity (relative value, secular demand). Cross-border investments and partnerships will be crucial in delivering the new housing, infrastructure, and retrofits Europe needs.

In the residential sphere, if governments and the private sector can collaborate to boost housing supply – without overly dampening investment incentives – there’s potential to alleviate the housing shortage by late this decade, which would stabilize prices and benefit societies. In commercial real estate, embracing flexible work patterns and new consumer behaviors can revitalize assets that adapt, even as those that don’t may fade. By 2028, we expect a European real estate landscape that is more resilient, sustainable, and tech-enabled, with growth opportunities in every challenge addressed.

Ultimately, the European Union’s real estate market stands at a crossroads of caution and opportunity. The next few years will see the sector chart new horizons, propelled by cautious optimism and a focus on long-term value creation over short-term hype. As evidence of this mindset, 80% of European real estate leaders expect business confidence and profits to rise or hold steady in 2025, reflecting this tempered optimism pwc.com. They are, however, ready to adjust course if needed – mindful of uncertainties but driven by the enduring demand for quality spaces where Europeans can live, work, shop, and thrive. The real estate cycle is turning, and those aligning their strategies with macro realities, societal needs, and sustainability imperatives will lead the way in the European Union’s real estate market from 2025 through 2028 and beyond.

Sources:

European Commission, Spring 2025 Economic Forecast: Moderate growth amid global uncertainty – GDP & inflation projections economy-finance.ec.europa.eu pubaffairsbruxelles.eu
PwC/ULI, Emerging Trends in Real Estate® Europe 2025 – industry outlook and sentiment pwc.com europe.uli.org
CBRE Research, European Real Estate Market Outlook 2025 – macro trends, sector forecasts, capital markets analysis mediaassets.cbre.com cbre.com
Reuters, German house prices to climb 3.5% this year… – German housing market poll and context reuters.com reuters.com
Global Property Guide, Residential Property Market Analysis 2025 (Germany, France, Spain, Italy, Poland) – housing price data, supply/demand, policy notes globalpropertyguide.com globalpropertyguide.com globalpropertyguide.com globalpropertyguide.com globalpropertyguide.com
European Commission, Signals of a turnaround in the housing market (Spring 2025) – EU housing price trends, borrowing capacity, supply collapse economy-finance.ec.europa.eu economy-finance.ec.europa.eu
CBRE France, Real Estate Market Outlook 2025 – French economy and sector outlook (weak growth, office recovery timing) cbre.fr cbre.fr
CBRE Europe, Capital Markets Outlook 2025 – investment recovery drivers, international capital returning cbre.com cbre.com
CBRE Europe, Sector Spotlights 2025 (Office, Retail, Logistics, Living) – leasing trends, vacancy, rents, key metrics mediaassets.cbre.com mediaassets.cbre.com mediaassets.cbre.com mediaassets.cbre.com
ABN AMRO, Housing Market Monitor Jan 2025 – Netherlands housing price rebound and drivers (mortgage rates, shortage) abnamro.com abnamro.com
Sarupya Ganguly (Reuters), Germany’s struggling housing market… – interest rate cuts aiding German housing, election uncertainty reuters.com reuters.com
Tamila Nussupbekova (GlobalPropertyGuide), France’s Residential Market 2025 – price declines easing, construction crash data globalpropertyguide.com globalpropertyguide.com
Lalaine C. Delmendo (GlobalPropertyGuide), Spain’s Residential Market 2025 – double-digit price growth, construction upturn globalpropertyguide.com globalpropertyguide.com
CBRE/ULI, Emerging Trends Europe 2025 – Key Findings – top cities (London, Madrid, Paris) and sectors (data centers, etc.) europe.uli.org
CBRE, Sustainability Chapter, Outlook 2025 – ESG reporting requirements (CSRD/ESRS), impact on yields and transition plans cbre.com cbre.com
PwC/ULI, Emerging Trends Europe 2025 – ESG challenges and industry response pwc.com pwc.com
JLL, Global Real Estate Perspective May 2025 – Q1 2025 volume uptick (referenced via search snippet) jll.com
Savills, European Investment Outlook – projected volume increases in 2025 and 2026 (referenced via search snippet) savills.com
Knight Frank, ESG outlook 2025 – green building rent premium (referenced via search) exquance.com
CEO interviews via PwC/ULI – focus on “debt, demographics, decarbonisation, deglobalisation, digitalisation” for profits europe.uli.org.