European Investment Atlas

Fair Value Index: Underpricing Abounds

The FVI edged down marginally to 89, with 78% of tracked markets remaining underpriced. Lower bond yields and risk premium were offset by softer capital growth forecasts, weighing marginally on the headline index score. Crucially, no markets are classified as fully priced. Classification shifts were limited, and valuation dispersion persists—a sign of selective yet plentiful opportunity. Logistics still offers the most opportunities, scoring the highest of any sector.

Key Highlights

• All-Property European TIME Score: 3.2, up from 3.0 in Q1 — confirming the market is at a turning point, with recovery broadening across sectors.
• Fair Value Index: 89, with 78% of markets underpriced, signalling sustained opportunities, as pricing has yet to fully adjust to improving conditions.
• All German markets remain underpriced, showing a wide range of opportunities. Logistics posted the highest FVI, presenting the most compelling opportunities.
• Lenders are leading the recovery, driving price discovery and liquidity, and setting new clearing prices—paving the way for renewed equity investment.
• Investor sentiment is rebounding, with fundraising and transaction volumes picking up as bid-ask spreads narrow—especially in core, income-secure, and ESG-aligned assets.

Strategic Themes & Capital Dynamics

Lenders have re-engaged faster than equity, using refinancing and restructuring to gain share and set new clearing prices. Intense competition is compressing margins across assets and risk profiles, and structures are increasingly flexible. The 5-year SONIA sits materially below a year ago and EURIBOR has stabilised—supporting accretive debt on most non-trophy assets. Debt capital is leading the recovery, with lenders moving 12–18 months ahead of equity and driving renewed liquidity and price discovery.

Strategy in Recovery

Fundraising is rebounding, with managers re-tooling mandates toward diversified or income-secure strategies. Core capital is cautiously returning, albeit focused on stock quality and pricing discipline. Expect a selective, sentiment-led upswing through 2026, with buyers remaining price-sensitive if yields compress too quickly.

Outlook: Confidence returns

As bid-ask spreads narrow and liquidity improves, transaction volumes are set to rise. Value-driven entries are especially compelling as 78% of European markets are underpriced. Selectivity and quality will drive outperformance: focus on core income, diversified strategies, and prime ESG-aligned assets, while maintaining flexibility to adapt to shifting sector and geographic opportunities.

TIME SCORE

The TIME score offers a streamlined method for illustrating key changes in several crucial indicators, providing investors with valuable tools for assessing and predicting market dynamics.

FAIR VALUE INDEX

The Fair Value Index, a forward-looking tool providing insights into the attractiveness of pricing in Europe's prime office, retail, and logistic property markets.