European real estate showing signs of recovery

Recent INREV Market Insights indicate a modest but notable return of confidence in the European non-listed real estate market. 

INREV

The headline INREV Consensus indicator rose to 56.4 in September from 52.2 in June, ending two consecutive quarters of decline, with four out of five subindicators showing improvement. Investment Liquidity saw the most significant boost, moving out of contraction to 55.2.
The Financing subindicator remains a strong point, reaching 67.3—its highest level since tracking began in March 2023. Nearly 40% of respondents reported better financing conditions from both traditional and non-bank lenders. Furthermore, 27% observed more favorable loan-to-value ratios and looser covenant structures, up from 19% in June, suggesting an increasingly accommodating lending environment.
While fund-level total returns dipped slightly to 0.98% in Q2 2025 (from 1.08% in the prior quarter), with capital growth easing to 0.17%, the outlook signals a potential turning point. Southern European markets, particularly Spain and Italy, continue to lead in sentiment. These regions are benefiting from broader economic growth and offer diverse opportunities beyond core sectors and strategies, attracting investors to hotels, student housing, and operational assets. Spain, in particular, consistently delivers solid returns across sectors.
France and Germany, which have lagged recently, are now showing signs of sentiment stabilization. Although their performance was hindered by significant office exposure and negative capital growth, falling valuations are now creating potential re-entry points, hinting at an inflection point in the near future.
Despite these early signs of returning confidence, a marginal increase in risk sentiment is also reported, likely due to persistent external pressures like international trade turbulence.
Residential remains the most preferred sector, attracting 39% net interest—a 14% increase since June and well above its 27% long-term average, underscoring its consistent resilience over three years. Hotel and leisure emerged as the second most favored sector, with 21% of respondents planning increased investments—more than double its 10% long-term average. This indicates a growing investor appetite for sectors beyond traditional mainstays, reflecting a diversification strategy in the evolving European real estate market.
Iryna Pylypchuk, director of Research and Market Information at INREV, commented: “It is reassuring to see signs of confidence returning to non-listed European real estate. After two consecutive quarters of decline, the latest sentiment is promising; however, it is too early to call it a full-swing, pan-European recovery just yet. France and Germany may also be nearing the bottom of the cycle where a valuation threshold will attract renewed investor interest, despite recent political and/or economic turbulence. Overall, while the market seems to be turning a corner, how long this turning point will drag on through a sluggish recovery remains difficult to predict. Looking ahead, we can expect growing dispersion in performance across different market segments just as much as within the same sectors and geographies.”
For the current quarter, 32 organizations contributed to the INREV Consensus Indicator, including 12 investors and 20 fund managers.