Economic Growth: More Investment, Less Consumption
We expect economic activity to accelerate in Europe, despite weakening labour market, driven by increased investment in the main countries.
Southern Europe will continue to lead European GDP growth; but Germany, France and UK will make key contributions to the overall growth driven by investment spending.
Inflation fell below the 2.0% target in the Eurozone and trending down in the UK. We see the ECB keeping policy rate stabile through 2026 with the BoE cutting one more time.
Momentum Builds In Capital Market
Total investment for 2025 amounted to €177bn showing a consistent 9% year-on-year increase. All assets contributed to overall growth.
The office sector has emerged from its downturn while logistics continued to maintain a solid position.
Retail experienced more investment in 2025 helping to push down yields
While transactions numbers remained consistent, higher-valued deals began to re-emerge.
Office Letting Volumes Consolidated in 2025
Letting in the 18 main European office markets amounted to 8.01 million sqm at the end of 2025, in line with 2023 and 2024 results. This level stands close to the 5-year average, reflecting a market that remains broadly stable over the past three years.
Prime office rents continue to rise across most European cities, driven by a persistent shortage of new supply.
Vacancy gap between non-CBD and CBD locations continues to grow due to the abandonment of non-CBD locations.
Selective Improvement In The Logistics Market
The occupier market recorded contrasting trends across Europe. Demand strengthened in the UK, Spain and Germany and rents rose by 4.6% in 2025.
Capital markets showed some positive signs at the year. The return of portfolio deals is an encouraging development for the quarters to come. Yield decompression has closed with stabilisation nearly everywhere in Europe, creating a more predictable environment than seen in previous years.
Retail: Promising Prospects For Occupier Market
Signs of stabilization were depicted in Retail with a modest increase of 5% in investment volumes over the past 12 months. The Retail segment now lays at the core of investors’ strategies with Germany and the UK still leading the sector and capturing almost half of transaction volume.
The recovery of the retail market is now largely complete with retail sales rebounding the last few months of the year and the return of physical shopping experience as a pillar of experiential retail. While High Streets and Shopping Centres showed strong performance, Retail Warehousing emerged as the most active segment in 2025.
Residential: Activity Remains Resilient
Residential investment volume in Europe reached €43.2bn (+2% y/y) in 2025, thanks to a higher number of the small to mid-scale deals that continue to fuel residential activity.
The European residential investment market was essentially driven by domestic investors accounting for 73% of the volume.
House prices and rental values increased by 5.0% and 4.1% y/y, respectively in Q3 2025. Despite the ongoing regulations in Europe, rental values are still booming in most cities to reach new record levels.
