European property sector poised for growth in 2026

Cushman & Wakefield's "European Outlook 2026" report indicates a significant shift in Europe's real estate markets, moving from a period of caution to one of conviction and growth. 

C&W European Outlook 2026 report

Following a year of uncertainty, 2026 is set to bring renewed confidence, propelled by stabilising economic conditions, improving financing costs, and strong structural drivers. Both investors and occupiers are transitioning from a cautious stance to active engagement, with a particular emphasis on prime and ESG-compliant assets.
Kevin Thorpe, chief economist at Cushman & Wakefield, noted: “As we head into 2026, the tone has shifted meaningfully. There is still risk on both sides of the outlook, but we’ve moved past the peak levels of uncertainty, and confidence in the commercial real estate sector is building. Capital is flowing again, interest rates are stable or moving lower, and leasing fundamentals are generally stabilising or improving. If 2025 was a test of resilience, 2026 has real potential to reward it.”
Sector Overviews:
Prime Offices: Core Central Business Districts (CBDs) are leading rental growth due to tight supply and strong demand for high-quality, well-connected office spaces. Vacancy in core areas has dropped to 7.1%, driving a 3.7% year-on-year rent increase. With construction at a decade low, supply constraints will persist, pushing average rental growth to 4.7% between 2025-2027 in core markets, with London and Paris leading. Prime yields are expected to compress to 5% by 2027.
Logistics Corridors: Occupier activity has stabilised across Europe, with cautious decision-making. Growth in H2 2025 was supported by defence, clean energy, and resilient consumer spending. Tightening availability due to slower construction will lead to stable vacancy in 2026, then a decline in 2027. Prime rents are forecast to grow 2.2% between 2026-2027, with strong increases in the UK, Spain, Sweden, and France. Investor appetite remains high, with attractive lending conditions and expected yield tightening of 40-75 basis points by 2029.
Retail Transformation: Retail sales and confidence are rebounding in major European cities as physical stores transform into experience-led hubs. Prime retail rents are predicted to grow 1.9% annually over the next two years in prime locations. Investor confidence is strengthening, with retail now accounting for 16% of European investment volumes, up from 12% in 2021. Large deals are becoming more common, especially in Southern and Central Europe, and prime yields are projected to compress by 15-55 bps from 2026-2029.
Living Sector: Persistent demand, driven by demographic trends outpacing supply, will sustain strong growth. Low building permits in the UK and Germany will exacerbate availability pressure. Private residential rents are forecast to rise significantly in the UK (3.7%), Germany (3.1%), and Spain (5.3%) in 2026, with the Netherlands also seeing notable growth. Government policies, including VAT reductions and levy relief, are supporting project viability despite high construction costs.
Hotels: European tourism is projected for healthy growth in 2026, with hotel stays increasing by 5.6%, primarily driven by international visitors. Investment volumes are expected to exceed €27 bn in 2026, with the UK, Spain, France, and Italy leading capital inflows. The DACH region saw a 71% surge in investment year-to-date in September, driven by core buyers. Luxury properties and economy/midscale hotels are key targets for investors due to strong performance and operational efficiency.
Data Centres: Demand for data centres in EMEA is rapidly accelerating, fueled by AI, cloud computing, and digital transformation. Western Europe faces capacity challenges due to power availability, shifting focus to large brownfield sites and alternative development strategies. The Nordics are emerging as a key destination for hyperscale operators due to carbon-free energy and scalability. Growth is also evident in Southern and Central European hubs, attracting significant investment as strategic connectivity gateways. Overall, IT load in EMEA is projected to grow by up to a 32% compound annual rate between 2025 and 2030, making data centres a highly competitive and fast-growing asset class.