19th century style residential buildings in the historic center of Paris, France.
Colderall | moment | Getty Images
Analysts have forecast that Europe's real estate sector is poised for further recovery in 2025, with a rebound in investment activity and growth returns across key market sectors.
The gradual rise in transactions in 2024 looks set to accelerate in the next 12 months, with further interest rate cuts easing pressure on the sector and reviving weak growth from recent years.
Property investment activity is now expected to rise by 15% next year across the UK and other major European markets, according to the property sector. firm CBRE, which described 2025 as a “pivotal” year for the sector.
“All property capital values are showing early signs that they have reached a turning point and are expected to gain momentum over the next year,” said Janet Siebrits, head of UK research at CBRE. “Our forecasts point to competitive returns across all property sectors, with key assets expected to perform the strongest.”
Offices
It looks at the office sector in Europe He recovers more Next year, as occupancy rises alongside return-to-office mandates.
This would push leasing levels closer to historical averages than they have been anemic in recent years, according to CBRE.
M&G Investments said in a report in December that the sector's recovery would be polarised, with rents and valuations varying between the “best and the rest”. Expectations.
She added that the supply of primary or first-tier offices will remain constrained and in high demand, while interest in secondary assets will remain low.
residential
Analysts agree that the residential market is positioned for more activity next year, with borrowing costs falling further.
Average asking prices are expected to rise by 4% by the end of 2025 – a slight rise on recent years but in line with the long-term average, according to Rightmove. Meanwhile, rents will remain high as supply constraints remain.
Among prime real estate, prices are also expected to continue to grow, maintaining Europe's position as a center of global wealth.
Stockholm, Marbella and Madrid are expected to lead the trend, recording price growth of more than 5%, Knight Frank noted in its flagship residential project. Expectations for 2025. Meanwhile, London and Paris will remain at the top of the luxury markets despite political volatility and a crackdown on the wealthy.
Beds and sheds
Elsewhere, demand for operational real estate – or beds and sheds – will remain strong, with particular opportunities in logistics centres, student accommodation and hospitality.
Concrete residential building covered with green plants, Madrid, Spain
Alexander Spatari | moment | Getty Images
But analysts warn that understanding structural trends – such as digitalization and demographic shifts – will be key to distinguishing between winners and losers.
Key trends for 2025
Investors will also be closely monitoring some of the key trends that could impact the real estate market in the coming year.
Sustainability targets set for the UK and Europe will require strong coordination between occupiers, landlords, investors and lenders, while new construction targets could create further opportunities in key markets.
AI is expected to become more important to the sector, with 85% of respondents citing PwC’s 2024 forecasts reconnaissance Saying that they expect artificial intelligence to have some or significant impact on all areas of real estate within the next five years.
This could include current use cases, such as maximizing hotel occupancy and predicting why a renter would choose one property over another, or future applications such as property management and market analysis, the report said.
