European commercial real estate market slows down

Europe's commercial real estate market slowed significantly in the first half of 2025, with investment activity falling 7% to €91.7 bn, according to MSCI’s latest quarterly Europe Capital Trends report.

Most active countries

The slowdown was mainly due to anxieties over US trade tariffs and geopolitical instability. Second-quarter transactions totaled €46.2 bn, a 10% decrease year-over-year, bringing the total investment for the first half of the year to €91.7 bn (-7%).
The number of active buyers and sellers was at a decade low, with US investors, typically major cross-border buyers, reducing their acquisitions. All major real estate sectors experienced volume declines. Office deals hit €20.3 bn in H1, down 6% year-on-year and a low not seen since 2010. However, prime properties in key cities are still attracting interest, with firms like Blackstone and Norges Bank Investment Management deploying capital.
Yields for Central London offices compressed, indicating continued demand for top-tier assets. While hybrid work poses challenges, high-quality, sustainable buildings in central business districts are experiencing rental growth in cities like Paris and London.
Outlook and Regional Performance
Tom Leahy, head of EMEA Real Assets Research at MSCI, commented: “There are some tentative signs that things may be settling down. The pipeline of deals pending completion at the start of July was the strongest in three years, suggesting a modest rebound. Falling interest rates in the Eurozone are supportive for pricing, and certain occupier markets have been performing robustly. Some segments of Europe’s most liquid office markets are also recovering. This bodes well for a better second half of the year, assuming there are no additional shocks.”
Despite a 14% drop in sales volume, the UK remained the most active European real estate market in H1, while the French market saw little change compared to 2024. Germany and Sweden bucked the overall trend, experiencing rebounds in transaction volumes of 15% and 11% respectively.
UK & Ireland
UK investment volumes decreased by 11% year-over-year in Q2, totaling €13.9 bn, but remained the most active in Europe, exceeding Germany's investment volume by more than double. Despite a 17% drop in investment compared to H1 2024, London remained the top European investment destination. UK office investment rose by 27% in H1, particularly in Central London, where transaction yields narrowed by over 50 basis points to just above 5.5%. Ireland's commercial real estate investment plummeted 57% to €1.0 bn in H1. Dublin's investment contracted by 63%, causing it to fall to 22nd place among top European investment destinations.
Germany
German real estate investment increased by 15% year-over-year to €16.5 bn in H1, despite a 27% drop in Q2. Germany's office market remains weak, with first-half transactions 70% below the 10-year average. There are signs that pricing for German offices may have bottomed out, potentially attracting buyers back to the market, similar to trends in London and Paris. Apartment block sales decreased by 43% in Q2 compared to the previous year, following a strong Q1. Berlin ranked third among Europe's top investment destinations with €2.8 bn in transactions (-17%), while Frankfurt returned to the top five European investment destinations.
France
France recorded €10.5 bn in commercial real estate investments, showing little change from the previous year. Paris maintained its position as the second-highest European investment market, trailing only London, with transaction volumes rising 16% to €6.6 bn. Gecina's €433 mln acquisition of the Le Solstys office building from Dekabank marked Europe's largest single property transaction during H1. Paris office deal volume increased to €3 bn, driven in part by Norges Bank Investment Management's purchase of an 80% stake in the Trinity tower from Unibail-Rodamco-Westfield.
Netherlands
The Netherlands experienced a 19% decrease in investment in H1, but remained the sixth-largest European market, trailing the UK, Germany, France, Sweden, and Spain. Investment in Dutch industrial properties, including logistics warehouses, fell by almost 50%. Amsterdam saw a 26% drop in investment, causing it to slip to 19th place in the ranking of Europe's most active investment destinations.
Nordic Region
Sweden and Denmark were the only Nordic markets to experience growth, with investment volumes rising 11% and 47%, respectively. Sweden's completed transactions totaled €6.3 bn, driven by office and apartment block acquisitions, propelling it to fourth place among top national markets in Europe. Danish investment volumes doubled in Q2, reaching a total of €3.0 bn for H1. Norway's real estate investment market contracted by 14% to €2.5 bn, while Finland's fell by 24%. Stockholm ranked fourth with €2.1 bn in transactions. Investment in Copenhagen more than doubled to €1.7 bn, elevating it to seventh place.