The European commercial real estate market remains in a transitional phase. Both the Fair Value Index (FVI) and the TIME Score held steady in Q1 2025, signalling a stabilising environment—one where deterioration has paused, yet a full recovery is still on the horizon. For investors, this presents a compelling window for strategic entry.
Over the past year, the TIME score has consistently indicated an inflection stage across all sectors. This phase typically marks the shift from downturn to recovery. Hospitality continues to lead the cycle, while Offices remain slightly behind.
Investor sentiment remains cautious amid ongoing macroeconomic uncertainty. This has led to a broad downgrade in growth expectations, although select market segments continue to show resilience. Importantly, robust risk premiums have helped anchor market stability, reinforcing the relative attractiveness of commercial real estate over risk-free alternatives.
The European FVI edged down slightly to 91 in Q1 2025 (from 92 in Q3 2024), primarily due to rising bond yields. However, this was largely offset by resilient risk premiums and recalibrated return expectations. Notably, 82% of tracked markets remain underpriced—highlighting widespread investment opportunities.
As global dynamics evolve, investors are navigating a more fragmented landscape. Opportunities are emerging in Tier 2 countries, while geopolitical tensions and economic divergence are prompting portfolio de-risking. Key strategic themes— such as supply chain resilience, decarbonisation, and ESG alignment—are increasingly central to investment strategies.
Real estate financing remains favourable in 2025, underpinned by strong lender competition, ample capital, and innovative debt structures. Rising loan-to-value ratios and improved underwriting confidence are contributing to a highly liquid and competitive environment. While some refinancing pressure persists, distress remains limited. This cycle is defined not by capital scarcity, but by selective and strategic deployment.
Looking ahead, easing interest rates and moderating inflation are expected to bolster investor confidence. Greater clarity on U.S. policy should further support sentiment in the second half of the year. With underpriced assets, improving financial conditions, and resilient sector fundamentals, European real estate is well-positioned for a potential rebound in H2 2025.
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.
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.
European Forecast & Fair Value Index
