Geopolitical uncertainty and higher borrowing costs are reshaping investor behaviour in the European commercial real estate (CRE) market, according to Cushman & Wakefield.
The firm’s latest Investment Atlas report highlights a market transitioning into a more mature phase of recovery, where opportunities remain significant but increasingly require precision, discipline and careful asset selection.
Recovery Continues Despite Macro Headwinds
Cushman & Wakefield’s proprietary cyclical positioning indicator TIME Score for European all-property assets edged down marginally to 3.0 in Q1 2026 (3.1 in Q3 2025), reflecting tighter financing conditions. The market, however, remains firmly in the stabilisation stage of the cycle.
At the same time, its Fair Value Index, which measures the relative attractiveness of pricing in prime office, retail and logistics markets across Europe, shows 56% of European markets remain underpriced, underscoring continued investment potential. However, the window for broad-based repricing is narrowing as more markets transition to fair value and a small number become fully priced.
While geopolitical tensions in the Middle East have slowed transaction activity, underlying occupier fundamentals remain resilient, supported by strong labour markets, limited supply, and continued rental growth in prime assets and locations.
“European markets remain broadly attractive, but as they move closer to fair value, conviction and asset selection become increasingly important drivers of returns,” said Guilherme Neves, Senior Research Analyst, EMEA Forecasting at Cushman & Wakefield.
Opportunities Narrowing
Logistics and retail assets continue to occupy the investment ‘sweet spot’ in terms of favourable timing and fair value, offering attractive risk-adjusted opportunities. Meanwhile, residential and office assets remain in the ‘strategic matrix’, where performance increasingly depends on asset quality, location, and income growth potential.
The office sector remains highly selective, with demand concentrated in prime assets capable of delivering strong leasing performance.
Recent repricing has been particularly evident in Germany, where approximately half of markets have shifted to fairly priced, while Hungary and Italy have recorded some of the most significant valuation adjustments. The number of fully priced markets has risen to nine, located in Hungary, Italy and Norway, highlighting how quickly pricing dynamics can shift in response to rising interest rates.
Debt Soothes Market Sentiment
Following a brief pause triggered by geopolitical shocks, lenders have returned to active deployment, with capital availability remaining deep and diverse across banks, debt funds, and alternative lenders. However, transaction activity continues to be limited by a gap between buyer and seller pricing expectations.
“Debt has done its part – liquidity is there, the financing case is made. The question now is whether equity finds the market conviction,” said David Gingell, Co-Head of EMEA Debt Advisory at Cushman & Wakefield.
Strategy Shifts Toward Income and Resilience
As valuation-driven gains diminish, the report notes a clear shift in investor strategy toward income generation, operational execution, and asset resilience.
Markets with strong supply-demand fundamentals, sustainable rental growth, and high-quality assets are expected to outperform in the next phase of the cycle. Some investors are doubling down on their prioritization of sectors such as logistics and living, but retail is now very much back in demand. More buyers are also selectively re-engaging with office opportunities where fundamentals support long-term value.
“Volatility is nothing new but the speed of change in the macro environment is a new reality that requires a strategy response,” said David Hutchings, Head of EMEA Investment Strategy at Cushman & Wakefield. “The positive news for investors is that property offers a number of levers to exploit to smooth portfolio performance – but only if you choose the right assets that match occupier needs.”
Selectivity Defines the Next Phase
Looking ahead, Cushman & Wakefield expects the European CRE recovery to continue, albeit at a more measured pace. Should the current peace negotiations in the Middle East remain on track, geopolitical uncertainty and financing conditions will ease further and transaction activity could then regain momentum.
In the meantime, success will hinge on disciplined capital deployment, granular market selection, and a focus on assets capable of delivering durable income.
