European Outlook 2026
Optimism Returns to European Commercial Real Estate
As Europe enters 2026, the commercial real estate market is moving from resilience to cautious optimism. Stabilising inflation, easing monetary policy, and renewed fiscal support are creating a more favourable investment environment, while structural trends such as digital transformation and demographic shifts continue to shape demand across sectors.
This outlook follows a year of remarkable resilience in 2025, when global GDP grew by 3.2% despite historic tariffs, tight labour markets, and geopolitical tensions. A key driver was the rapid adoption of Artificial Intelligence, which boosted productivity and fuelled demand for data centres and advanced industrial space. With policy uncertainty receding and capital flows returning, 2026 offers opportunities for investors and occupiers to secure prime assets and align strategies with enduring growth themes.
Key Takeaways
Economy
Europe’s economy is showing signs of stabilisation, with GDP growth expected in both the euro area and the UK, alongside moderating inflation and easing financing conditions. While labour markets are softening, unemployment rates are holding steady and should remain at low levels. Wage growth is moderating but continues to outpace inflation, setting the stage for healthy consumer spending into 2026. Read more.
Office
European office markets show a strong “flight to quality,” with nearly 75% of leasing concentrated in prime city locations. Vacancy rates are falling, core rents rose 3.7% last year, while construction remains at a decade low. Persistent supply shortages and improving fundamentals are attracting investors, with further rental growth and selective yield compression expected. Read more.
Logistics
The European logistics market has stabilised, with occupier activity just below pre-pandemic highs and early signs of recovery. Supply is tightening as construction slows, supporting steady rental growth, averaging 2.2% per year between 2026 and 2027. Investor appetite remains strong, aided by favourable lending conditions and underpriced markets, with yields expected to compress further. Read more.
Retail
Retail is rebounding as consumer confidence and tourism recover, boosting demand for prime locations where stores evolve into immersive brand hubs. Rents in top-tier assets are rising, supply remains tight, and capital is returning, positioning the sector for continued growth and yield compression in 2026. Read more.
Living
Housing demand continues to outpace supply, constrained by low permitting and high construction costs. Rents are set to rise steadily across Europe in 2026, led by Spain and the Netherlands, while government support measures aim to improve development viability amid ongoing structural shortages. Read more.
Hotels
European hotels are poised for steady growth in 2026. Hotel stays are set to increase by 5.6%, while hotel investment should exceed €27 billion in 2026. Luxury and economy segments lead interest, while limited supply supports asset values. Rising labour costs and stricter city regulations pressure margins, making targeted strategies and active management essential for returns. Read more.
Data Centres
Demand for data centre services across EMEA is accelerating, driven by AI, cloud adoption, and digitalisation. Power access dictates growth: Western Europe faces constraints, while the Nordics thrive as Europe’s AI hub. Southern Europe emerges as a connectivity gateway, and Middle East initiatives accelerate expansion. Investment strategies hinge on reliable, affordable energy and evolving regulatory frameworks. Read more.
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