UK office values grow above European average

New data from real estate data insights company Altus Group reveals that UK office values grew by 0.9% in Q1 2025, exceeding the European average of 0.8% and signalling a recovery.

Pan European residential - Altus Group

While still behind France's 3% growth, the UK outperformed Germany (+0.3%), the Netherlands (-1.1%), and Spain (-1.2%). However, year-over-year, UK office values experienced the sharpest decline (4.4%) among major European economies. Germany, Spain, and the Netherlands saw year-over-year declines of 1.5%, 1.9%, and 3.1% respectively, while France showed significant growth at 8%.
Over the past three years, encompassing the post-pandemic period, UK office values declined by 6.4%, a smaller drop than France (-7.1%), Germany (-9.6%), and the Netherlands (-11.1%).
Across Europe, property values saw a modest 0.8% increase in Q1 2025, marking the third consecutive quarter of growth. Values are up 2% year-over-year but still down 15% compared to three years ago. Easing interest rates contributed to the recovery. European commercial real estate performed better than the US market in Q1 2025.
Phil Tily, senior VP at Altus Group, commented: “We’re encouraged to see the slow but steady growth across all major property sectors for the third consecutive quarter, reinforcing cautious optimism in the European real estate market. The resilience of residential and industrial assets reflects ongoing investor appetite for sectors underpinned by strong cash flows and rental growth. While macroeconomic conditions remain mixed, the stabilization in yields and improved fundamentals point to a maturing recovery cycle across the region.”
Residential led sector growth at 1.5%, driven by strong cash flow and rent growth for the second consecutive quarter. The Netherlands performed particularly well due to rising rents.
Following a strong Q4 2024, the industrial sector saw moderate 0.8% growth in Q1 2025. Stable yields, combined with stronger cash flows and increased market and contract rents, contributed to this fourth consecutive quarter of growth. Italy and Spain led the gains within the sector.
Office values increased for the third straight quarter, rising 0.8% in Q1 2025 due to improving yields and cash flows. France led in valuation gains, while Germany and the UK saw declines.
Retail experienced modest 0.5% growth in Q1 2025. While rising yields negatively impacted shopping centre values, declining yields benefited high street shops and supermarkets. Retail warehouses continued to lead the sector's performance over the past year. Over the past three years, retail proved most resilient, with average annual value declines of just 2.8%, while offices experienced the steepest declines.
Student accommodation outperformed hotels and other sectors in Q1 2025, with a 3.0% value increase compared to Q4 2024.