European Real Estate Sector Poised for Revival in 2025
As the global economy continues to recover, Europe’s real estate sector is expected to experience a significant upswing in 2025. Analysts predict a 15% increase in investment activity across major European markets, driven by reduced interest rates and renewed growth in key market segments.
Office Sector Recovery Gains Momentum
The office sector is expected to recover further next year, driven by rising occupancy rates and return-to-office mandates. Leasing levels are predicted to approach historic averages, with prime assets delivering the strongest performance. However, the recovery will be polarized, with rents and valuations diverging between high-demand primary assets and lower-demand secondary assets.
Residential Market Set for Greater Activity
The residential market is also poised for greater activity in 2025, as borrowing costs continue to fall. Average asking prices are expected to rise 4% by the end of the year, while rents will remain elevated due to supply constraints. Prime real estate markets, such as Stockholm, Marbella, and Madrid, are expected to lead the charge, with price growth exceeding 5%.
Operational Real Estate in High Demand
Demand for operational real estate, including logistics hubs, student accommodation, and hospitality, will remain strong in 2025. Investors will need to understand structural trends, such as digitization and demographic shifts, to differentiate between winners and losers.
Sustainability and Technology to Shape the Sector
Incoming sustainability targets in the U.K. and Europe will require strong coordination between stakeholders, while new construction targets could create opportunities in key markets. Artificial intelligence is expected to play a critical role in the sector, with 85% of respondents to a 2024 PwC survey predicting AI will have a significant impact on real estate over the next five years.
A Pivotal Year for European Real Estate
As the sector recovers, 2025 is shaping up to be a pivotal year for European real estate. With competitive returns across all property segments, investors will need to stay ahead of the curve to capitalize on emerging trends and opportunities.
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