- Cushman & Wakefield’s ‘European Outlook 2026’ report takes a detailed view of the macro economic forces that are set to influence commercial real estate in the years ahead
- Confidence in European real estate is building, with core sectors poised for growth as fundamentals and investor sentiment improve
After a year defined by uncertainty and adjustment, Europe’s real estate markets are entering 2026 with renewed confidence according to Cushman & Wakefield’s latest forecasts in its European Outlook 2026.
“As we head into 2026, the tone has shifted meaningfully,” said Kevin Thorpe, Chief Economist at Cushman & Wakefield. “There is still risk on both sides of the outlook, but we’ve moved past the peak levels of uncertainty, and confidence in the commercial real estate sector is building. Capital is flowing again, interest rates are stable or moving lower, and leasing fundamentals are generally stabilising or improving. If 2025 was a test of resilience, 2026 has real potential to reward it.”
Sector Overviews
Prime Offices: Core CBDs Lead Rental Growth Amid Tight Supply
Occupiers continue to prioritise high-quality, well-connected office space, driving strong tenant demand and investor interest in major Central Business Districts (CBDs). In Q2 2025, 75% of leasing activity was focused on CBD locations such as London, Paris, Frankfurt and Amsterdam. Vacancy in core areas has tightened to 7.1%, pushing rents up 3.7% year-on-year and 13.2% over the past three years. With just over 10 million sq m under construction, the lowest level in a decade, supply constraints are set to persist. Rental growth across core markets is forecast to average 4.7% between 2025 and 2027, led by London’s West End (10.3%), City of London (9.9%) and Paris CBD (6.1%). Prime yields are expected to compress by 25 basis points to 5% by 2027.
Logistics Corridors: Stabilising Occupier Activity and Favourable Lending Conditions
Occupier take-up across Europe stabilised in Q3 2025, remaining just below pre-pandemic levels, but decision-making stays cautious. Nonetheless, several markets saw improvement in the second half of 2025, largely supported the defence and clean energy sectors as well as resilient consumer spending. Availability continues to tighten as construction pipelines slow, and vacancy is expected to stabilise in 2026 before trending lower in 2027. Prime headline rents are forecast to grow roughly 2.2% between 2026 and 2027, with the strongest increases in UK, Spain, Sweden and France. Investor appetite remains high, with pricing stabilising and lending conditions among the most attractive for any asset class. Yields are expected to tighten by 40 to 75 basis points by 2029.
Retail Transformation: Experience-Led Formats and Prime Locations Gain Traction
Retail sales and confidence are rebounding in major European cities including Madrid, Milan and Paris, as physical stores evolve into brand experience hubs. Prime retail rents are forecast to grow by 1.9% annually over the next two years, driven by the best locations and schemes. Investor confidence is strengthening, with retail now accounting for 16% of total European investment volumes, up from the 12% trough registered in 2021. Larger deals of €250 million and above are increasingly common, particularly in Southern and Central Europe. Pricing is starting to tighten in some regions, with retail parks and shopping centres seeing inward yield shifts in recent quarters. This momentum is expected to continue, with prime yields across Europe projected to compress by 15 to 55 bps from 2026 to 2029.
Living Sector: Persistent Demand and Policy Support Underpin Growth
Demand in the living sector will remain strong, driven by demographic and societal trends that continue to outpace supply. With building permits at multi-year lows in the UK and Germany, pressure on availability is set to persist. Private sector residential rents are forecast to rise 3.7% in the UK, 3.1% in Germany, and 5.3% in Spain in 2026, with notable growth also expected in the Netherlands. While construction costs remain high, government policy measures, including VAT reductions in Ireland and Portugal and levy relief in the UK, are supporting project viability
Hotels: Tourism Recovery Fuels Investment Across Key European Cities
European tourism is set for healthy growth in 2026, with hotel stays forecast to rise by 5.6%, driven by visitors from international markets. Cities such as Warsaw, Athens and Stockholm are expected to see the strongest growth, while Lisbon, Dublin and Edinburgh may moderate after a strong 2025. Investment volumes are expected to exceed €27 billion in 2026, up from €25 billion in 2025. The UK, Spain, France and Italy lead capital inflows, while the DACH region surged 71% YTD September, driven by the return of core buyers. Key targets are luxury properties (72% growth in H1 2025), underpinned by their strong performance, and economy/midscale hotels (50%), which are valued for their efficiency and lower labour cost exposure.
Data Centres: Digitalisation and Power Infrastructure Shape EMEA Expansion
Demand for data centres across EMEA is accelerating as AI, cloud computing and digital transformation reshape infrastructure needs. Western Europe faces capacity challenges in Tier 1 markets due to power availability, prompting a shift towards large brownfield sites and alternative development strategies. In contrast, the Nordics are emerging as a key destination, offering carbon-free energy and scalability for hyperscale operators. Growth is not confined to mature markets, with hubs in Southern and Central Europe offering strategic connectivity gateways and attracting significant investment. Overall, IT load in EMEA is projected to grow at a compound annual rate of up to 32% between 2025 and 2030, making data centres one of the fastest growing and most competitive asset classes in the region.
Guilherme Neves, Senior Research Analyst for EMEA Forecasting at Cushman & Wakefield, said: “Recovery in Europe’s real estate market is being supported by gradually improving economic fundamentals. Prime office hubs such as London, Paris and Frankfurt are seeing strong occupier demand, while logistics remains a key focus for investors. At the same time, trends like digitalisation and sustainability are reshaping investment strategies and opening new opportunities for those ready to move early.”
