Insights

Trends in the European Real Estate Market for 2025

The European real estate sector approaches 2025 with cautious optimism, driven by the stabilization of interest rates and asset valuations. According to the report by PwC and the Urban Land Institute (ULI), business confidence and profits are expected to remain stable or improve, despite ongoing challenges such as regulation, construction costs, and geopolitical instability.

Market Outlook

Eighty percent of the report's participants foresee stable or improved business profits. Lenders are ready to resume activity but remain cautious about lending costs, signaling a recovery marked by uncertainty and fluctuations. Current optimism could quickly fade if geopolitical events trigger renewed inflation and further interest rate hikes.

Key Sectors and Sustainability

Investment in technological and energy-related infrastructure, such as data centers and renewable energy, will dominate priorities in 2025. Environmental, social, and governance (ESG) principles remain critical, though regulatory challenges and associated costs complicate their implementation. The transition to net-zero emissions faces hurdles, including energy access and insurance costs.

Technology will also play a central role: 85% of respondents believe artificial intelligence will significantly impact the sector over the next five years, particularly in improving operational efficiency and decision-making processes.

Investment Preferences

Market size and liquidity are decisive factors when selecting cities for investment. London remains the most attractive city due to its resilience and liquidity, while Madrid has risen to second place, bolstered by its macroeconomic stability and quality of life. Paris, despite its strength, has dropped to third.

In Germany, cities like Munich and Frankfurt are showing signs of recovery after years of decline, whereas Dublin and other British cities have lost appeal. In Central Europe, cities like Warsaw and Prague are gaining confidence, while Southern European metropolises display mixed results.

In summary, 2025 presents a blend of challenges and opportunities for the European real estate market, with a focus on sustainability, technology, and geographic diversification.