After a year marked by uncertainty, European real estate markets are entering 2026 with renewed confidence. Cushman & Wakefield’s European Outlook 2026 report highlights that the region is poised for recovery, supported by stabilizing economic conditions, improved financing costs, and structural growth drivers. Both investors and occupiers are shifting from caution to action, with a particular focus on prime assets and properties that meet ESG criteria.
Madrid among Europe’s most dynamic retail markets
Retail sales and consumer confidence are rebounding across Europe’s major cities, with Madrid standing out as one of the most dynamic markets alongside Milan and Paris, as physical stores evolve into brand experience destinations in prime locations. Prime retail rents are expected to grow by 1.9% annually over the next two years, driven by the strongest assets and leading shopping streets.
Investor confidence is strengthening, with retail now accounting for 16% of total investment volume in Europe, compared with a low of 12% in 2021. Southern Europe is gaining prominence as an investment hotspot, supported by an increase in large-scale transactions exceeding €250 million.
Spain among the countries expected to record the strongest logistics rental growth
The take-up of logistics space in Europe stabilized in the third quarter of 2025, remaining slightly below pre-pandemic levels, although decision-making continues to be cautious. Against this backdrop, prime logistics rents are forecast to increase by approximately 2.2% between 2026 and 2027.
Spain is positioned as one of the markets with the strongest rental growth potential, alongside the United Kingdom, Sweden, and France.
New living trends point to continued growth in the living sector
Demand in the living sector is expected to remain strong, driven by demographic and social trends that continue to outpace supply across Europe’s major markets. Spain stands out as one of the countries forecast to record the highest growth in residential rents, with rents expected to increase by 5.3% in 2026, ahead of the United Kingdom (3.7%) and Germany (3.1%), while the Netherlands is also expected to post notable growth.
Prime offices: CBDs lead rental growth amid limited supply
Occupiers continue to prioritize high-quality, well-connected office space, driving strong tenant demand and investor interest in major Central Business Districts (CBDs). In the second quarter of 2025, 75% of leasing activity in Europe was concentrated in CBD locations, contributing to a further reduction in vacancy rates.
Tourism continues to drive hotel investment across Europe’s leading cities
The outlook for European tourism remains strong in 2026, with hotel stays expected to increase by 5.6%, supported by international demand. Spain leads capital inflows into the hotel sector, alongside the United Kingdom, France, and Italy, in a market where investment volumes are expected to exceed €27 billion in 2026, compared with €25 billion in 2025.
Data centres: digitalisation creates new growth hubs in Southern Europe
Demand for data centres across the EMEA region is accelerating as artificial intelligence and digital transformation reshape infrastructure requirements. This growth is also extending to Southern European hubs, which are gaining prominence due to their strategic connectivity, role as gateways to international markets, and ability to attract significant investment, expanding the traditional geography of data centre locations.
Overall, IT load capacity across EMEA is forecast to grow at a compound annual growth rate (CAGR) of up to 32% between 2025 and 2030, reinforcing data centres as one of the region’s fastest-growing and most competitive asset classes.
In this context of greater macroeconomic visibility and improving market fundamentals, Cushman & Wakefield’s recent European Investment Atlas report reinforces the findings of the European Outlook 2026, highlighting that the recovery of the European real estate market is becoming increasingly broad-based and widespread.
The report underscores the key role of debt capital as a catalyst for the new market cycle. More favourable lending conditions, increased liquidity, and clearer macroeconomic signals are helping to facilitate transactions and support market activity. Against this backdrop, the analysis shows that 78% of the European markets studied remain undervalued, meaning that current asset prices have yet to fully reflect the improvement in fundamentals and their medium-term growth potential, creating a strategic window of opportunity for investors.
