In 2026, we expect the commercial real estate and investment market in Europe will be defined by cautious optimism, growing into a general state of positivity. Over the past year, we’ve seen a stabilisation of the geopolitical landscape: Trump’s tariff wars, the Ukraine conflict, and Middle East tensions have all started to settle down. That’s significant, because it means governments, especially in Germany, are now in a position to provide real fiscal stimulus. Germany’s trillion-plus infrastructure and defence spending plan could be a major boost for growth, not just domestically but across Europe.
 
Europe’s relationship with the US has shifted. The US is essentially saying, ‘you’re on your own unless it’s in our interest’. That forces Europe to invest in itself, particularly in defence and manufacturing. Near-shoring is gaining momentum as governments and manufacturers look to reduce reliance on Chinese supply chains. These trends are positive for the market, but there are risks; if the Russia-Ukraine war escalates or tensions flare in the South China Sea, markets could be severely impacted. On the other hand, peace in Ukraine would present a huge opportunity for European contractors to lead the country’s reconstruction.
 
Interest rates are another key point. Markets are predicting European rates may start to move up next year, which would correspond to growth. That’s a sign the world is looking at Europe and thinking maybe things aren’t as bad as they were.

ESG remains a big story. In Europe, it’s culturally felt to be much more important than in the US, and as a result is driving obsolescence in real estate. If owners don’t invest in assets to meet ESG requirements - better carbon emissions, lower power consumption - they’ll lose tenants. That’s not going away and it’s a challenge that will remain central in 2026.
 
Infrastructure, especially power, is a growing issue. In places like the Netherlands, there’s a ten-year waiting list for new power connections, while we’re also seeing issues in Spain getting power to residential developments and in the UK too, although it may be better off thanks to historical grid redundancy. But in the face of incessant demand from AI, data centres and crypto, power availability for both commercial and residential real estate is going to be a key priority in 2026.
 
Migration and government policy are also shaping the market. Changes to visa regulations affect student housing demand and broader immigration issues impact affordability and residential pricing. Tax policy is a battleground - mansion taxes, stamp duty, all of it. European governments are trying to address inequality, so whether they continue their march on the wealthy in 2026 and the impact this will have on real estate will be interesting to see.
 
So, for 2026, I see a generally stable market, low supply, improving demand and flat to low interest rates. How the year evolves depends on political stability, fiscal stimulus and government intervention. As always there are positives and negatives, but overall, I think there’s reason for cautious optimism.