19th century style residential architecture in the historic center of Paris, France.
Cordral | Moment | Getty Images
Analysts predict that the European real estate industry is expected to recover further in 2025 as investment activity picks up and growth returns in key market segments.
Deal volumes look set to pick up pace in 2024 over the next 12 months, and further lower interest rates will ease pressure on the sector and revive growth that has been sluggish in recent years.
Property investment activity in the UK and other key European markets is expected to increase by 15% next year, according to property data company CBRE calls 2025 a “pivotal” year for the industry.
Jennet Siebrits, head of UK research at CBRE, said: “All property capital values ​​are showing early signs that they have reached an inflection point and are expected to gather momentum over the coming year. “Our forecasts point to competitive, high-quality returns across all property sectors. Assets are expected to deliver the strongest performance.”
office
European office industry attracts attention further recovery Next year, occupancy rates will increase as a return to the office is required.
CBRE said this would bring leasing levels closer to historical averages compared with the depressed levels of recent years.
However, M&G Investments said in a report in December that the sector’s recovery would be polarized, with rents and valuations differing between “the best and the rest”. prospect.
It added that prime or Grade A office supply will remain constrained and demand is strong, while interest in secondary assets will remain low.
Residential
Analysts agree that activity in the residential market will be more active next year as borrowing costs fall further.
Rightmove said average asking prices are expected to rise by 4% by the end of 2025, up from recent years but in line with long-term averages. Meanwhile, rents will remain high as supply constraints persist.
In prime real estate, prices will also continue to grow to maintain Europe’s position as a center of global wealth.
Knight Frank noted in its prime residential report that Stockholm, Marbella and Madrid led the way with price growth of more than 5% prospect By 2025.
bed and shed
Elsewhere, demand for operational real estate (or beds and sheds) will remain strong, particularly in logistics centres, student accommodation and the hospitality sector.
Residential concrete apartment building covered with greenery, Madrid, Spain
Alexander Spatari | Moment | Getty Images
But analysts warn that understanding structural trends such as digitalization and demographic changes will be key to distinguishing winners from losers.
Key trends in 2025
Investors will also be keeping a close eye on some key trends that could impact the housing market next year.
Upcoming sustainability targets across the UK and Europe will require strong coordination between occupiers, landlords, investors and lenders, while new construction targets are likely to create further opportunities in key markets.
Artificial intelligence will become more important to the industry, 85% of PwC respondents said in 2024 poll said they expect artificial intelligence to have some or significant impact on all areas of real estate over the next five years.
This could include current use cases such as maximizing hotel occupancy and predicting why tenants choose one property over another, or future applications such as property management and market analysis, the report said.
