Fiscal boost will drive economic growth in 2026
Economic growth in the first half of the year has been uneven due to the increase in US tariffs. That said, Europe has shown resilience.
Growth is expected to accelerate in 2026 on the back of increased defence spending across Europe and higher investment in Germany.
Inflation should stay close to 2% in the coming quarters, which means the ECB is likely to keep interest rates flat.
Capital Market kept progressing
Total investment for Q3 2025 amounted to €168bn showing a consistent 19% year-on-year increase. The increase is driven by all asset classes.
Following a sustained improvement over 2024, the nine months of this year continued to see expansion.
Persisting uncertainty around macroeconomic and financial background is likely to moderate the investment activity, nevertheless, the cutting cycle of the monetary policy have remained so far supportive.
Office Lettings still waiting for Real Momentum
Despite a sluggish performance, Frankfurt and Central London are seeing increased take-up, particularly for the German financial capital, which is showing a historic 20-year high with the return of large-sized transactions.
European rents continue to rise at a more moderate pace.
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 4.4% in Q3 (year-on-year).
Capital markets slowed in Q3 but some positive signs with the return of portfolios is encouraging 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: Recovery is in the Making
Retail investment volumes recorded an increase of 33% over the past 12 months, with shopping centres capturing the fastest growth rates. Germany and the UK remain investors’ preferred markets as they captured more than half of transaction volume.
Retail sales accelerated in Europe over the past year, despite tariff announcements and underlying economic uncertainties. Retail confidence also improved compared to last year’s levels, enabled by improved business prospects.
Residential: Smaller Scale Deals drive Activity
Residential investment volume in Europe reached €29.3bn (+7% y/y) over the 9 months of 2025, thanks to smaller-scale deals that continue to fuel residential activity.
House prices and rental values increased by 4.6% and 4.4% y/y, respectively in Q2 2025. Despite the ongoing regulations in Europe, rental values are still booming in several cities to reach new record levels.
