Principal Asset Management: Caution gives way to strategic selectivity

As industry leaders converge for EXPO REAL 2026, leadership at Principal Asset Management is offering a measured outlook on the European property landscape.

Rachel Shone

While global sentiment is cautiously stabilising, executives emphasise that the market is navigating a prolonged phase of normalisation rather than an immediate economic bounce-back.

Rachel Shone, managing director of Real Estate at Principal Asset Management, notes that while investor enthusiasm remains subdued, market fundamentals are finally beginning to ground themselves.

Shone highlights Germany as a primary focal point, noting the country remains entrenched in a protracted price-discovery phase as investors debate true asset values.

Persistently elevated interest rates mean this cycle heavily rewards precision. Dispersion in returns across different property types and funds requires a disciplined, long-term approach.

Rather than anticipating an aggressive return to growth, Shone expects Munich discussions to centre on whether stabilisation is officially morphing into recovery. Residential and data centres remain the firm’s top-conviction sectors due to tight supply and structural demand.

“Most participants now believe the worst of the repricing cycle is behind us, but few are ready to declare a full recovery,” Shone explains. “The dominant narrative is likely to be one of gradual normalisation.”

The Data Centre Opportunity

Sebastian Dooley, senior fund manager and data centre specialist, stresses that the most compelling opportunities in Europe’s digital infrastructure sector are in established cloud ecosystems equipped with robust fibre connectivity and steady enterprise demand.

While AI excitement is palpable, Dooley urges caution regarding facilities built exclusively for speculative AI model training. Focusing on cloud-oriented markets allows investors to capture durable, existing demand while safely participating in real-world AI applications.

“We are focused on sites which offer resilient, long-term opportunities that aren’t just reliant on AI growth,” Dooley notes, underscoring that selective discipline will pay dividends as the sector evolves.