Italy
Netherlands
Portugal
Spain
In the first half of 2025, the European commercial real estate market remained broadly stable. Following strong growth in Q1, investment volumes fell in Q2, resulting in overall year-on-year stability for H1 (+3%), according to the Dils’ European Market Report H1 2025.
This pattern reflected highly varied performances across monitored markets, with the two largest – the UK and Germany -experiencing a slowdown in Q2 2025, down 21% and 19% respectively compared to Q2 2024, while Southern European markets experienced another quarter of intense recovery.
Italy recorded the strongest year-on-year increase in investment volumes in the second quarter (+54%), driven by the dynamism of its hospitality and retail sectors, followed by Portugal (+37%) and Spain (+20%). At the European level, some of the more traditional asset classes – such as offices, logistics, and retail – delivered the best performance in Q2, while alternative sectors experienced a sharp contraction (-32%). This trend may indicate a renewed investor preference for familiar asset types in a period of uncertainty, combined with the completion of the repricing phase that has ushered in a new gradual yield compression.
Despite recording investment volumes in H1 2025 that were nearly unchanged from H1 2024, the living sector reaffirmed its position as the leading asset class across the monitored countries, largely thanks to its strong footprint in Northern European markets. In contrast, hospitality emerged as a key investment driver in Southern Europe, accounting for 21% of total volumes in Spain and reaching as high as 30% in Italy over the first half of the year.
The current phase continues to be supported by more favorable financial conditions, as inflation moved closer to its 2% target. After several consecutive rate cuts, the ECB opted to hold interest rates steady in July, signaling that monetary policy has now approached a neutral stance. The resulting improvement in credit availability has helped sustain investment momentum.
Looking ahead, the outlook for the remainder of 2025 remains cautiously optimistic. While the stabilization of yields has renewed investor interest, persistent geopolitical tensions along with growing concerns over global trade disruptions following the new tariff policies introduced by the U.S. administration, are weighing on sentiment. Combined with poor economic growth across EU member states, these factors could pose risks to market fundamentals and slow the pace of recovery.
In H1 2025, office occupier activity remained relatively steady, with most monitored cities registering modest levels of demand and take-up volumes broadly in line compared to the same period in 2024. Amid this cautious approach, the flight-to-quality trend remained evident, continuing to drive prime rent growth in core markets. Tenants increasingly prioritized energy-efficient, flexible, and well-located office spaces, sustaining demand at the top end of the market and partially offsetting the rise in vacancy rates.
The logistics sector continued its efforts toward stabilization following two years of declining occupier activity. In H1 2025, most national markets recorded a recovery in take-up levels, although figures remain well below pre-2023 levels. Activity was driven by selective demand for modern, high-spec facilities in prime locations, reflecting a continued flight-to-quality trend. Among the strongest performers, France stood out with a 17% year-on-year increase, while Italy – largely unaffected by the 2023 downturn – saw a modest decline as the market continued to stabilize.
In parallel, the residential sector continued to benefit from the positive impact of the interest rate cuts introduced in 2024, which improved access to mortgage financing and supported a recovery in housing demand. As a result, most monitored countries recorded an increase in residential transactions compared to the same period in 2024, with transaction volumes gradually approaching – and in some cases surpassing – the levels seen in 2022.
