Retail leads real estate investment growth in Europe

European retail property investment surged by 31% year-on-year in Q1 2025 to €36 bn, representing 22% of total investment.

Retail real estate investment - BNP Paribas Real Estate

This marks a significant rebound from its 15% share at the end of 2021, during the height of the pandemic, according to BNP Paribas Real Estate.
Retail is now approaching the levels of offices (27%) and logistics (26%), which grew by 3% and 19%, respectively. The hotel sector also performed well, growing by 13% compared to its 10-year average of 8%. 
While the UK, Germany, and France continue to attract the majority of retail investment, Spain, Italy, and Poland demonstrated impressive growth with year-on-year increases of 25%, 311%, and 382% respectively.
This renewed investor interest was driven by attractive risk premiums, particularly for out-of-town retail and shopping centres.
Shopping centres saw the biggest growth at 81%, with €7.2 bn invested, fuelled by large deals in Iberia.  High street investment rose by 33% to €9.4 bn, boosted by luxury retail, though this trend is expected to moderate. 
Yields are tightening for out-of-town retail and shopping centres in some markets such as Germany and the UK, and high street yields are also showing signs of contraction, particularly in the luxury segment in Spain, France and Italy.
A positive outlook for the retail sector is supported by resurgent tourism, exceeding pre-pandemic levels, and projected retail sales growth of 2% over the next two years, aided by stabilized inflation and improving consumer confidence. 
However, potential headwinds include moderating US consumption, the slower-than-expected return of Asian tourists, and ongoing geopolitical risks.
Patrick Delcol, head of European Coverage of Retail, Logistics and Hospitality for BNP Paribas Real Estate, commented: “Retail’s current healthy trend applied to all segments. As such, investment in out-of-town retail in the main European cities came in at €10.4 bn over the last 12 months, up 12% year-on-year. This segment has the advantage of investment opportunities across a wide range of unit sizes, with lower entry prices than other retail assets. The main indicators we track — such as investment volumes, rental trends and economic data — suggest a positive trend. The signs are all pointing towards a gradual recovery, giving us reason to be fairly confident about the outlook for retail in Europe in 2025.”