The European real estate market is poised for a transformative year in 2025, fueled by encouraging economic indicators, favorable financing conditions, and strategic adaptations to evolving trends. Cushman & Wakefield’s ‘EMEA Outlook 2025’ report highlights a market recovering from challenges and preparing for growth across various sectors.
Positive Macroeconomic Trends
Improved GDP growth, resilient labor markets, and easing interest rates are paving the way for renewed confidence in real estate investments. According to Sukhdeep Dillon, Head of EMEA Forecasting at Cushman & Wakefield, the stabilization observed in 2024 has set a robust foundation for 2025. As market volatility moderates, prime yields are expected to compress gradually, offering promising opportunities for capital growth and total returns.
Sector Highlights
Offices - Quality Over Quantity:
The office market is shifting towards premium-grade assets in central locations, with a forecasted prime rental growth of 2.1% in 2025. Investors are showing renewed interest in larger properties, particularly in core locations. Asset repositioning and climate-focused strategies are expected to shape the sector's long-term trajectory.
Logistics - From Stability to Strength:
The logistics sector is set to benefit from improved business confidence and investor interest. Prime locations with strong sustainability credentials will continue to outperform, with rental growth forecasted at 1.9% in 2025. While challenges such as potential trade disruptions remain, the sector’s resilience offers solid investment prospects.
Retail - Recovery and Resurgence:
Retail is emerging from a challenging period with strengthening rental growth and increased investor appeal. Prime high street retail and top-tier shopping centers are projected to see capital value increases of up to 2.4% in 2025, driven by enhanced consumer spending and investor confidence.
Living - Durable Demand:
The living sector’s strong supply-demand dynamic remains a key driver of growth. Entering an expansion phase, this sector presents significant opportunities for investors focused on long-term stability and capital appreciation. With trends in pricing and investment transactions showing positive momentum, the living market is poised to deliver stable and durable growth across Europe.
Hotels - Building on Momentum:
After years of robust performance, the hotel sector is set for moderate income growth and improving yields in 2025. With transaction activity expected to rise, investors have an opportunity to capitalize on value-driven expansions.
Adapting to shifting economic, environmental, and technological trends will be critical for long-term success. As Cushman & Wakefield’s report underscores, strategic capital deployment and a focus on prime, sustainable assets will drive recovery and growth in Europe’s real estate market heading into 2025.
