- Cushman & Wakefield releases its 2025 European real estate market outlook
- Positive economic indicators providing optimism
- Increased demand for office space expected, dominated by Grade A in key locations
- Retail, logistics, living and hotel sectors poised to build on positive end of year
Improving economic indicators such as GDP growth and resilient labour markets, coupled with more favourable financing conditions, are set to provide positive momentum for the European real estate market in 2025, according to Cushman & Wakefield’s ’EMEA Outlook 2025’ report.
While activity will vary by sector, adapting to shifting economic, environmental, and technological trends will be crucial to unlocking value and ensuring long-term success in the evolving landscape, advises the global real estate services provider.
Office prime rental growth is expected to lead the field with Cushman & Wakefield forecasting average growth of 2.1% across Europe in 2025, followed by retail and logistics at 1.9%.
Sukhdeep Dillon, Head of EMEA Forecasting at Cushman & Wakefield, said: “As we look ahead to 2025, the European real estate market is poised for a period of recovery and growth following a challenging few years. The stabilisation observed in 2024, coupled with a more positive macroeconomic outlook, improved business and consumer confidence, and easing interest rates, sets a strong foundation for the year ahead. The stage is set for the property sector to rebound more meaningfully going into 2025.“As market volatility moderates, we foresee a gradual compression of prime yields, signalling a positive outlook for capital growth and total returns and promising opportunities for investors willing to deploy capital strategically. A second Donald Trump’s U.S. Presidency throws a potential wild card into the outlook. But worth remembering, European property proved to be very resilient under Trump's first term. In fact, prime property values appreciated by 25% while Trump was in office.”
Sector Overviews
Offices: Quality Over Quantity
Cushman & Wakefield foresees continued upward pressure on rental growth in the region of 2.1% in 2025 and 1.6% in 2026. Meanwhile completions are anticipated to peak at 5 million sqm this year, before coming down slightly to 4.8 million sqm in 2025 and 3.4 million sqm in 2026.
Despite weak investment activity, representing just over 20% of total market activity in 2024, Cushman & Wakefield is seeing a marked increase in investors evaluating acquisitions and more product becoming available - including larger stock - kindling a cautious optimism for 2025. Cushman & Wakefield further forecasts a stabilisation in investment market pricing in 2025, with yields remaining largely unchanged and slight increases in capital values at the prime end.
Looking beyond 2025, carbon reduction and climate risk will continue to shape long-term strategies, with EU regulations expected to further impact asset values, leasing terms and tenant demand. Asset repositioning and repurposing are also expected to rise, especially in major cities like London and Paris, while peripheral office spaces may face declining demand, making repurposing a viable solution for obsolete buildings.
Logistics: From Stability To Strength
Rental growth is forecast to continue in 2025 but at a more modest pace than previous years, at 1.9%, and be more market-specific. The UK, Slovakia and Ireland are set to be the most active markets as demand for top-tier buildings in prime locations will remain strong, while countries like the Czech Republic and the Netherlands may see slow growth or stable rent levels. Overall, properties with strong sustainability features and prime locations are expected to outperform.
Cushman & Wakefield expects that logistics will continue to be a priority area of capital deployment for many investors. Investment sales volumes are projected to rise in 2025 as market volatility moderates and investor confidence rallies. However, the pace of activity will depend on the availability of investment product. Cushman & Wakefield forecasts prime yields to compress modestly in 2025, with a tightening of 10 to 20 basis points anticipated across most markets.
Retail: Recovery Leads to Resurgence
The retail market has demonstrated resilience and is well-positioned for recovery after several challenging years. Increased retailer activity and strengthening rental growth throughout 2024 have enhanced the sector's appeal to investors, with higher yields offering attractive leverage opportunities. The outlook for 2025 is positive for prime high street retail, with continued rental growth and likely improvements in capital values, which are forecast to increase by 1.9% and 2.4% respectively during the year.
As consumer dynamics improve - spurring increased foot traffic, higher spending, and better occupancy rates - investment volumes are set to rise. Cushman & Wakefield anticipates prime yields compressing modestly across retail asset classes in 2025. However, this positive momentum will primarily benefit high-quality, high-traffic assets that complement retailers’ growing ‘city-led’ strategies, such as retail parks, top-tier shopping centres, and prime high streets. Meanwhile, properties in secondary or less desirable locations are expected to face ongoing challenges, both in terms of market fundamentals and investor interest.
Living: Shifting Dynamics
Europe’s living sector has long been characterised by significant supply-demand imbalances across various regions and market segments. This has driven stable, long-term growth in both rents and capital values. However, as with other sectors, sharp rises in European interest rates have put pressure on capital values.
Cushman & Wakefield forecasts the living sector will continue to face development challenges in 2025, putting downward pressure on vacancy rates throughout the continent. However, evidence suggests the sector is poised to gain momentum, with trends in pricing and investment transactions showing improvement. The demand for living space will remain one of the strongest and most durable features across all commercial real estate sectors in Europe in 2025. Furthermore, Cushman & Wakefield’s TIME Score Index also suggests that the living sector is entering the expansion phase of the real estate cycle, with prospects for capital growth and total returns now heavily favouring investors deploying capital.
Hotel: Capitalising On Positive 2024 End With 2025 Expansion
Strong hotel performance since 2022 has helped offset the negative impact of rising financing costs and economic and geopolitical uncertainty. Cushman & Wakefield sees income growth moderating in 2025, but it will be complemented by gradually improving yields, driving value growth and transaction activity.
While high-profile portfolio sales in 2024 have boosted market sentiment, single-asset transactions in the €30-100 million range have remained subdued. This is changing, with the bid-ask spread between buyers and sellers narrowing. Hotel transaction volumes were up 42% year-to-date through September 2024 and the sector is expected to reach €20 billion by year-end. If the trend continues, Cushman & Wakefield predicts that volumes could surpass €25 billion in 2025.
Notes to editors:
Cushman & Wakefield’s latest TIME Score Index
The TIME Score Index leverages past, current, and future market data and economic indicators to predict future market movements and shifts in sentiment.
Cushman & Wakefield’s European Investment Atlas
In this publication, Cushman & Wakefield seek to answer ‘when’ to capitalise, ‘where’ you can find the most lucrative markets, and the ‘how’ to make these investments.
