19th century style residential building in the historic center of Paris, France.
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Analysts predict that Europe’s real estate sector is poised for further recovery in 2025 as investment activity picks up and growth returns across key market segments.
Transactions in 2024 are expected to pick up gradually over the next 12 months, as further interest rate cuts are expected to ease pressure on the industry and revive the lackluster growth of recent years.
Property investment activity is expected to rise by 15% next year across the UK and other major European markets, according to the property industry. hard CBRE calls 2025 a “pivotal” year for the industry.
CBRE’s head of UK research, Jennette Sieblitz, said: “Capital values across all properties are showing early signs that a tipping point has been reached and we expect momentum to build throughout the year ahead.” Ta. “Our forecasts show competitive returns across all real estate segments, with prime assets expected to perform the strongest.”
office
Europe’s office sector is expected to recover further next year as occupancy increases along with mandatory returns to offices.
CBRE said this would bring lease levels closer to historical averages compared to anemic rates in recent years.
However, M&G Investments said in its December outlook that the sector’s recovery will be polarized, with rents and valuations diverging between “the best companies and the rest”.
It added that primary or Grade A office supply remains subdued and while demand is strong, interest in secondary assets remains low.
Residential
Analysts agreed that the housing market will also become more active next year as borrowing costs fall further.
Average asking prices are expected to rise 4% by the end of 2025, according to Rightmove, which is up compared to recent years but in line with long-term averages. Meanwhile, rents will continue to rise as supply constraints continue.
Prices for prime real estate will continue to rise, maintaining Europe’s position as the world’s wealth hub.
In its 2025 key housing outlook, Knight Frank said Stockholm, Marbella and Madrid lead the way, recording price increases of more than 5%. Meanwhile, London and Paris will continue to lead the luxury goods market despite political flux and a crackdown on Uber. Wealthy, it said.
bed and storage
Elsewhere, demand for operational real estate, i.e. beds and cabins, remains strong, with opportunities particularly expected in logistics hubs, student accommodation and hospitality.
Concrete apartment building covered with green plants, Madrid, Spain
Alexander Spatari | Moments | Getty Images
But analysts warn that understanding structural trends such as digitalization and demographic shifts will be key to differentiating winners from losers.
Key trends in 2025
Investors will also be keeping an eye on some important trends that could impact the real estate market next year.
Setting new sustainability targets in the UK and Europe will require strong coordination between occupiers, landlords, investors and lenders, while new construction targets will create further opportunities in key markets There is a possibility.
Artificial intelligence is set to become even more important in this area, with 85% of respondents in a 2024 PwC survey expecting AI to have some or significant impact on all areas of real estate over the next five years. said.
This may include current use cases such as maximizing hotel occupancy or predicting why tenants choose one property over another, as well as future applications such as property management and market analysis. The report states that there is.
