The Time is Now for European Real Estate

Investors are reassessing where real estate can deliver durable income and risk-adjusted returns. Europe stands out for relative stability in a volatile environment, supported by repriced valuations, accretive debt, resilient occupier markets and sector-specific supply constraints that reinforce rent growth.

While short-term uncertainty remains—from geopolitical tensions and mercurial policy shifts to an uneven macro recovery—Europe’s relative geopolitical neutrality and accommodative monetary policy outlook are cementing a resilient outlook for occupier demand. For many investors, the appeal is a relative risk-reward assessment, grounded in selective, risk-conscious capital deployment. Capital flows remain cautious, regional recoveries are uneven and investor appetite highly selective, underscoring the strategic discipline shaping how and where capital is now being reallocated.

On July 18, CBRE Investment Management hosted a live webinar which discussed these themes, featuring an in-house panel of senior professionals, moderated by Peter Bretveld, Senior Director, Client Solutions. Speakers included:

• Paul Gibson, CIO, EMEA Direct Real Estate
• Alexander van Riel, Head of EMEA Indirect Real Estate
• David Inskip, Head of EMEA Research
• Maria Wiklund, Senior Research Associate

The discussion ranged from Europe’s shifting macro and geopolitical positioning to asset repricing, capital flows, sector divergence and execution risk. Panelists explored how selective deployment can generate risk-adjusted returns, how portfolios are evolving across the capital stack and why fundamentals favor disciplined exposure to logistics, residential, prime offices and select retail assets.

Below we summarize the key takeaways.

1. Macro and monetary tailwinds strengthen Europe’s relative appeal

Europe’s macro outlook continues to improve, albeit unevenly across the region. Southern economies, such as Spain, Portugal and Italy, are benefiting from job growth, robust domestic demand and targeted investment through EU recovery funds. Germany is shifting from export-led growth to infrastructure-led investment, anchored by a €500 billion national program expected to support long-term demand for real assets.

Monetary policy has turned decisively more supportive. The European Central Bank (ECB) has delivered eight consecutive rate cuts since mid-2024, totaling 200 basis points (bps) and bringing the deposit rate to 2.0%. After pausing cuts in July, further easing is still expected. The ECB’s earlier, faster easing cycle has made debt accretive to returns—particularly in logistics and residential—supporting capital flows and reinforcing Europe’s relative appeal.

2. Repricing reset—fundamentals driving selective recovery

Repricing across European real estate is largely complete, with value resets most advanced in retail and office sectors. Transactions are returning across core markets, bid-ask spreads are narrowing and buyer competition is intensifying—particularly for rebased, income-generating assets. Fundamentals are reinforcing the recovery. Rent growth remains positive across logistics, residential and prime offices, supported by structural undersupply and cautious development pipelines. Demand is strongest for well-located, sustainability-compliant assets in cities like London and Paris, where quality and specification are key differentiators.

Core logistics continues to deliver strong rent growth. Prime retail is showing NOI growth and lease spreads above ERVs. Residential demand remains high, especially in purpose-built student accommodation (PBSA), senior living and U.K. single-family rental formats. These offer scalability, income durability and in some cases lighter regulation, making them attractive amid muted growth in regulated multifamily rents. Outdated office and retail stock face persistent headwinds, but prime repositioned assets are re-emerging as credible recovery plays.

3. Sector strategies are shifting toward resilience and execution

Capital is rotating toward sectors with income durability, low supply risk and clearer execution paths. Logistics remains a top target, offering low vacancy, accelerating rent growth and strong development spreads in core locations. Prime CBD offices are regaining momentum in rebased markets like London and Paris, where tenants are prioritizing sustainability, location and flexibility.

Retail is recovering selectively. Shopping centers with stable NOI growth—particularly in southern Europe—are attracting capital at yield premiums. Rebased rents, reduced competition and renewed leasing activity are reshaping investor sentiment. Improved financing is supporting activity where repricing is complete and demand holds. Lending appetite is broadening beyond logistics and residential into retail and high-quality office. Execution risk and income visibility are now central to strategy across the capital stack.

4. Strategic discipline is defining capital allocation

Investors are prioritizing risk-managed strategies over speculative growth. While macro and sectoral conditions are improving, capital remains highly selective, focusing on stabilized income, downside protection and operational momentum rather than ground-up development or high-leverage plays.

Development appetite is constrained, especially in offices, where high costs and exit uncertainty complicate underwriting. Mezzanine debt strategies face similar headwinds, with elevated senior loan pricing eroding returns. Instead, capital is concentrating in core-plus logistics, income-producing residential platforms and high-yield retail formats.

This discipline is reshaping regional allocation. European LPs are deferring U.S. mandates and reallocating toward pan-European strategies, while Canadian and Asian investors are rotating into Europe, drawn by relative macro stability and financing advantages. These investors also have a growing interest in indirect strategies and opportunistic secondaries, particularly where fund vintages offer rebased entry points. Conviction strategies include U.K. single-family rental, repriced London offices and southern European shopping centers, each balancing dislocation and income durability in distinct ways.