The global real estate landscape is a dynamic tapestry, constantly influenced by economic sentiment, interest rate policies, and geopolitical shifts. For institutional investors navigating international markets, understanding these underlying currents is paramount.
Latest reports from Europe signal a welcome resurgence in real estate investment, marking a notable shift after a period of subdued activity. This renewed interest not only reflects improved market conditions but also highlights the enduring appeal of various property types to investors seeking stable long-term returns.
Following years of quieter activity, investment in European real estate is experiencing a robust recovery, as highlighted by new research from commercial property leader CBRE. The first quarter of 2025 saw a 6% annual increase in real estate investment across Europe, totaling €45 billion. This positive momentum is largely attributed to a more favorable macroeconomic environment and a trend towards lower interest rates. Over the past 12 months, overall investment volumes have soared by a quarter, reaching €213 billion.
The flow of capital has been broad across different property types. "Living assets," which include multi-dwelling units and student accommodation, led the charge with a 43% increase over the past year, aligning with previous investor surveys identifying them as prime targets. Retail investment also saw strong growth, rising 31% year-on-year over the last 12 months and showing the highest quarterly increase of 26% in Q1 2025. Hotels, industrial and logistics properties, and office spaces also recorded annual investment increases of 23%, 19%, and 16% respectively. Healthcare was the sole sector to register a decline in investment volumes during this period.
This positive trend in Europe aligns with similar observations from other markets, such as the U.K., where first-quarter investment volumes in key office, industrial, and retail sectors have also seen a resurgence. This improvement comes after signs of stabilization in 2024, influenced by central banks moving towards interest rate cuts and better growth prospects across major European markets.
Despite this encouraging start, CBRE has issued a word of caution. A recent shift in global economic sentiment, partly influenced by new U.S. tariff policies, could temper investor appetite moving forward. Chris Brett, CBRE's head of Capital Markets for Europe, noted a solid start to 2025 with retail, living, and office assets being particularly attractive, but anticipates a more conservative approach from both sellers and buyers in response to market volatility. The International Monetary Fund (IMF) recently revised its 2025 global growth forecast downwards to 2.8%, citing U.S. tariffs as a significant negative factor, and also lowered its outlook for the euro area's growth to 0.8%.
Conclusion:
The Q1 2025 performance of the European real estate market offers a compelling narrative of resilience and recovery, driven by fundamental improvements in economic conditions and investor confidence. For institutional investors, particularly those with a global outlook, this data underscores the strategic appeal of diverse property assets in Europe. While the prevailing macroeconomic uncertainties, as highlighted by CBRE and the IMF, call for a measured approach, the underlying demand for well-positioned assets remains evident. Monitoring how these forces balance out will be key to identifying emerging opportunities and navigating the evolving landscape of international real estate investment.
Source Attribution:
This report is based on findings originally published by CNBC, drawing insights from CBRE research.