LONDON, 11 June 2025 – Cushman & Wakefield’s ‘Midpoint 2025: From Caution to Strategic Conviction’ report reveals a European commercial real estate market that is stabilising and showing signs of renewed investor confidence, despite ongoing macroeconomic and geopolitical uncertainties.
The firm’s latest data shows that transaction volumes rose 7.4% year-on-year in Q1 2025, with Germany and the UK leading the recovery. While the on-again and off-again trade tensions between the U.S. and the EU continue to weigh on sentiment, Cushman & Wakefield believes the worst of the trade disruption has passed and will continue to ease as new deals are agreed. There is further cause for optimism with moves towards a more expansionary fiscal policy setting the stage for a recovery in 2026.
Sukhdeep Dhillon, Head of EMEA Forecasting at Cushman & Wakefield, said: “The European commercial real estate market is transitioning from caution to conviction. While forward-looking indicators remain mixed, the fundamentals across sectors, particularly in logistics, living, and prime retail are robust. As inflation moderates and rate cuts take hold, we expect capital markets to respond positively, unlocking new opportunities for investors in the second half of 2025 and into 2026.”
Offices: Focus on the Core
Office leasing slowed in early 2025 amid geopolitical uncertainty, but demand nonetheless remains focused on high-quality space in central business districts (CBDs), which accounted for 70% of leasing activity over the past year (60% pre-pandemic). Leasing activity in 2025 is expected to stay broadly in line with 2024, with positive net absorption of 1.3 million sq m. Cushman & Wakefield believes that as geopolitical risks ease and trade agreements progress, improved corporate confidence should lift activity into 2026.
Meanwhile, vacancy continues to rise in non-central areas, reinforcing the bifurcation between core and peripheral markets. Rents in central locations remain under upward pressure, driven by strong demand for high-quality, well-located space. However, growth is slowing as affordability pressures mount and more new office space hits the market. Office deliveries across Europe are set to rise by 23% year-on-year (YOY) in 2025, with cities like London and Milan accounting for the largest share of this new supply. Prime office rents are forecast to grow by 2.7% in Europe (ex-UK) and 6.8% in the UK in 2025, while yields are expected to compress by 9 basis points.
Logistics: Fundamentals Support Recovery
Despite a soft start to the year, logistics take-up is stabilising near pre-pandemic levels. Easing monetary policy, stabilising demand, and tight supply are expected to support recovery into 2026. Prime rents are forecast to grow by 2.6% in Europe (ex-UK) and 5.1% in the UK in 2025. Yield compression of 17 basis points is expected across logistics assets this year, driven by strong investor demand and limited supply. Investment volumes rallied in Q1 2025 (€46 billion) and are set to increase as pricing adjusts to the new rate environment and vendor expectations align with market realities.
Retail: Prime Assets in Demand
Retail continues to show resilience despite tariff-related planning challenges and the momentum is expected to continue into 2025. Prime rental growth is forecast at 2.4% in Europe (ex-UK) and 4.9% in the UK for 2025. Investor interest is returning, particularly for high-footfall urban locations and retail parks, amid improved sentiment and better debt availability. Capital value growth is expected to reach 3.3% in Europe and 4.9% in the UK, with total returns of 8% and 10.8% respectively.
Living: Supply Constraints Drive Growth
The living sector remains underpinned by structural supply-demand imbalances which show little sign of easing with building permits across the euro area continuing to decline despite robust urban population growth. The result is a sustained upward pressure on rental values (6.4% YOY in Q1 2025), particularly in supply-constrained urban centres. Because of this, the case for rental growth remains compelling—not just in the short term, but well into the medium term—offering institutional investors a resilient income stream in an otherwise uncertain macroeconomic environment.
According to Cushman & Wakefield’s European Living Investor Survey 2025, 80% of investors plan to increase allocations to the sector over the next five years.
