Transitioning from caution to recalibration

2025 proved to be a year of adjustment rather than recovery for Europe. While inflation gradually came under control and monetary policy began to ease, economic growth remained subdued and uneven across the region. For real estate markets, this period marked the transition from repricing to repositioning. After two years of yield correction and limited liquidity, investor activity cautiously resumed, pricing expectations moved closer to alignment, and capital re-entered selected sectors and geographies where income security and long-term fundamentals were clearest.

By the end of 2025, European real estate markets were no longer dominated by the question of where values would bottom out, but rather how assets should be structured, operated and financed in a more constrained and fragmented environment. Higher-for-longer interest rates, stretched public finances, and rising geopolitical and regulatory pressures have fundamentally altered the operating context for investors, occupiers and developers alike. At the same time, structural trends linked to infrastructure, energy, defence, and changing consumption patterns have moved from the periphery to the core of investment decision-making.

Looking ahead to 2026, the market is expected to evolve selectively rather than uniformly. Liquidity will continue to favour income-producing assets, essential infrastructure and sectors aligned with long-term policy priorities, while capital-intensive or non-operational assets face greater scrutiny. Regulation is becoming both a constraint and a catalyst, reshaping capital allocation through sustainability requirements, sovereign considerations and operational standards. Meanwhile, occupier demand is increasingly driven by functionality, experience and resilience rather than pure space absorption.

Against this backdrop, this report explores six key themes that we believe will shape the European real estate landscape in 2026.

1. Rising sovereign debt and returning real estate lenders  How tighter sovereign budgets, refinancing risk and elevated funding costs are influencing asset pricing, liquidity and investment structures. 
2. Defence: Rearmament reshapes space  The growing impact of increased defence spending on real estate demand, infrastructure, and industrial ecosystems across Europe. 
3. Regulations: Navigating a changing regulatory landscape  As rules tighten, performance will increasingly be shaped by local policy rather than cyclical momentum. 
4. The rise of OpRE: From passive assets to operating businesses  The continued shift towards assets offering stable cash flows, pricing power and operational control. 
5. Infrastructure: The assets behind the assets  How infrastructure investment is moving from a supporting role to a defining component of real estate value, challenging traditional notions of ‘core’ across Europe. 
6. Experience-led economy: When experience becomes the currency  The growing impact of experiential consumption, hyper-personalisation and place-making are shaping the next phase of growth for hospitality-led real estate.

_{Read the articles within Spotlight: European Property Themes 2026 report below}