CBRE 2025 Mid-Year European Real Estate Market Outlook: Key Insights Across Sectors
Economic Backdrop
Europe’s consumer-led recovery continues in 2025, but momentum has stalled amid persistent global uncertainties and softer confidence. Inflation is easing, allowing for further interest rate cuts by the ECB, while tight labor markets remain a growth constraint. Trade policy risks and geopolitical volatility weigh on sentiment, with growth strongest in Central and Eastern Europe.
Capital Markets
Investment activity in Continental Europe is resilient, up 6% year-on-year in Q2 2025, driven by easier financing and a pipeline of loan and equity maturities. Investors are notably focused on opportunities in the living and office sectors. A rebound in sales activity is expected in H2 as confidence and asset availability rise.
Offices
Leasing activity in offices is gradually recovering, with a 5–10% increase expected in 2025. Occupiers increasingly focus on high-quality, well-located space, tightening vacancy in CBDs compared to secondary areas. Prime office rents are set to grow at a slower pace than in 2024 amid cautious occupier demand.
Retail
Retail fundamentals are improving, underpinned by rising real incomes and robust leasing activity. Retail parks outperform with strong demand and rental growth, while prime high streets also report healthy leasing and rising rents. Secondary retail space continues to lag, and trade policy remains a downside risk.
Logistics
The logistics sector sees stabilizing take-up and rising vacancies, now exceeding 5% for the first time in a decade. Leasing is forecast to strengthen in H2 2025 as macroeconomic clarity returns. Prime logistics locations are driving rent growth, and occupiers increasingly prioritize high-quality, future-proofed assets to support supply chains.
Living
The living sector remains undersupplied and increasingly attracts investor attention, particularly in rental models such as build-to-rent, student, and senior housing. The scarcity of assets and rising demand is expected to push prices further, though government incentives may be needed to address longer-term imbalances.
Hotels
Europe’s hotel market continues to benefit from recovering tourism. While RevPAR (revenue per available room) growth has moderated, both occupancy and room rates remain on an upward trajectory, supported by a slowdown in new hotel openings. The sector attracts value-add investments on expectations of further operational improvement.
Data Centres
The European data centre market expects record take-up in 2025, with capacity in the five largest markets (FLAPD) driving growth. Vacancy rates are forecast to hit historic lows, notably in markets like Frankfurt and London. Rents will continue to rise as power shortages and strong demand limit available capacity, with secondary cities like Milan also advancing rapidly.
Conclusion
Despite ongoing uncertainty and shifting dynamics, Europe’s commercial real estate sectors demonstrate clear areas of resilience and opportunity. Investors remain focused on quality, location, and sustainability as sector performance continues to diverge across the region.
Read the European Real Estate Market Outlook - Mid-Year Review 2025.
