C&W: European real estate investors prioritise selectivity

Cushman & Wakefield's latest Investment Atlas report indicates that the European commercial real estate market is entering a more mature recovery phase, characterised by geopolitical uncertainty and higher borrowing costs.

Cushman & Wakefield

This environment demands greater precision and careful asset selection from investors.

The firm's TIME Score for European all-property assets slightly decreased to 3.0 in Q1 2026 (from 3.1 in Q3 2025), reflecting tighter financing conditions, though the market remains in a stabilisation stage. Despite this, the Fair Value Index shows that 56% of European markets are still underpriced in prime office, retail, and logistics sectors, suggesting continued investment potential. However, the window for widespread repricing is narrowing as more markets reach fair value or become fully priced.

While geopolitical tensions have impacted transaction volume, underlying occupier fundamentals are strong, supported by robust labour markets, limited supply, and rising rents in prime assets. Logistics and retail properties are particularly attractive due to favourable timing and fair value. Residential and office assets require a more strategic approach, with performance tied to asset quality, location, and income growth. The office sector specifically sees demand focused on prime assets with strong leasing potential.

Significant repricing has been observed in Germany, where roughly half of markets are now fairly priced. Hungary and Italy have also experienced substantial valuation adjustments, with nine markets in these countries and Norway now fully priced, highlighting the rapid impact of rising interest rates.

Despite a brief pause due to geopolitical events, lenders are actively deploying capital, with diverse funding sources available. However, a gap in buyer and seller price expectations continues to limit transaction activity.

Markets with strong supply-demand dynamics, sustainable rental growth, and high-quality assets are expected to perform well. Investors are increasingly focusing on sectors like logistics and living, with renewed interest in retail. Some buyers are also cautiously re-engaging with office opportunities that demonstrate long-term value.

Guilherme Neves, senior research analyst, EMEA Forecasting at Cushman & Wakefield, said: “European markets remain broadly attractive, but as they move closer to fair value, conviction and asset selection become increasingly important drivers of returns,” said

David Gingell, co-head of EMEA Debt Advisory at Cushman & Wakefield, commented: “Debt has done its part – liquidity is there, the financing case is made. The question now is whether equity finds the market conviction.”

David Hutchings, head of EMEA Investment Strategy at Cushman & Wakefield, added: “The positive news for investors is that property offers a number of levers to exploit to smooth portfolio performance – but only if you choose the right assets that match occupier needs.”

Cushman & Wakefield anticipates a continued, though slower, recovery in the European commercial real estate market. If peace negotiations in the Middle East progress, reduced geopolitical uncertainty and improved financing conditions could boost transaction activity.