European CRE stalls in 2025, recovery expected in 2026 – MSCI

In 2025, the European commercial real estate market saw little change in investment activity compared to the previous year, with a total of €224.9 bn in transactions. 

Annual transaction volume 2025 - MSCI

Geopolitical instability, slow economic growth, and specific property sector challenges stalled the anticipated recovery, as reported by MSCI's latest Europe Capital Trends.
The fourth quarter of 2025 recorded €71.5 bn in transactions, a 9% decline from the same period in 2024. 
Tom Leahy, head of EMEA Real Assets Research at MSCI, commented: “Europe’s real estate investment markets remained in a holding pattern in 2025. Low liquidity and modest returns persisted in the context of geopolitical volatility, a subdued outlook for some larger European economies and a more competitive environment for capital raising. Even so, pockets of outperformance have emerged, and the much-anticipated rebound in office investment is now underway, albeit focused on a subset of high-quality assets.”  
Leahy added: “There are plenty of reasons why Europe should break out of this loop in 2026: property valuations have mostly bottomed out, fund-raising is recovering, and a competitive financing market is making borrowing more affordable. Clearly there will be winners and losers in this new cycle. Investors will prioritise deeper, liquid markets. They will favour assets offering pricing power and cashflow visibility, and target sectors benefiting from structural tailwinds, such as how cloud computing and the adoption of AI is fuelling the wave of data centre construction.”  
"Alternatives" to traditional office, retail, and industrial assets reached a record 18% share of European transaction volumes in 2025, driven by the appeal of data centres and social infrastructure like senior housing, student accommodation, healthcare, and affordable housing.
The office sector showed signs of recovery, with a 10% increase in transaction volumes to €52.7 bn in 2025, marking its strongest quarterly sales activity in three years during Q4. This recovery was concentrated in prime assets in key markets like central London, Paris, and Germany's A cities, exemplified by Blackstone's €700 mln acquisition of the Centre d’Affaires Paris Trocadéro.
The UK remained Europe's top investment market, outperforming Germany and France combined, and was the first major European market to recover from rising interest rates. UK investment volumes remained steady at €65.5 bn, with Q4 showing a 21% year-on-year gain. London led Europe for foreign investment, although investment volumes fell 8%. UK office transactions hit a three-year high, and industrial properties were boosted by portfolio sales. Ireland's market contracted by 16% to €4.1 bn, with Dublin ranking 8th among European investment destinations despite a 19% drop in activity.
Investment in Germany remained largely unchanged at €36.3 bn. A recovery in retail, residential, hotel, and industrial assets was offset by a weak office sector. Overall volumes were about 70% below their Q1 2022 peak. Berlin ranked third among European investment destinations, with €5.9 bn in transactions.
France registered €27.9 bn in CRE investments, a 17% increase, boosted by the industrial and residential sectors. Q4 saw a 20% rise to €9.0 bn. Large office deals in Paris lifted the office sector, though overall volumes were still over 50% below the 10-year average. Paris hosted Europe's largest single property transaction: Blackstone's €700 mln purchase of the Centre d’Affaires Paris Trocadéro.
The Dutch market contracted by 3% to €12.6 bn, ranking sixth in Europe for investment activity. Amsterdam remained 10th among European investment destinations with €3.0 bn in transactions.
In the Nordic Region, Sweden's investment volumes grew 30% to €15.0 bn, making it the fourth largest in Europe. Norway was the only Nordic market to see a decline (39% to €4.3 bn). Denmark and Finland experienced significant increases of 36% and 63%, respectively. Stockholm ranked fifth among Europe's top investment destinations, with €5.0 bn in property sales (-10%).