European Market Report Q2 2026

Total investment across the monitored countries reached €76.2 billion in H1 2026, marking a 15% year-on-year increase and confirming the continued recovery of European real estate capital markets. Despite some divergence in Q2 performance at the country level, the first half as a whole delivered broad-based growth: every market recorded a rise in investment volumes, ranging from +3% in France - where a resilient Q2 offset a softer Q1 - to +36% in Italy, which posted its strongest H1 on record.

Southern Europe continued to outperform, underpinned by sustained investor appetite, with Spain and Italy leading in terms of activity. By contrast, traditionally dominant markets such as Germany and France are still struggling to recover their pre-2023 scale, reflecting a slower repricing process and more cautious institutional sentiment. In H1 2026, the Netherlands delivered a solid performance, while the UK stabilised at a quarterly run-rate of €11–13 billion, signalling a market that has largely found its floor.

Growth in investment activity was broad-based across asset classes. The hospitality sector was the standout performer, recording a +31% year-on-year increase driven by strong volumes in the UK alongside the sustained dynamism of Mediterranean markets. Living also gained momentum, benefiting from heightened activity in both the UK and Spain. At the other end of the spectrum, retail posted the most modest growth of the half (+1% year-on-year): after a strong run in 2025 and despite doubling of volumes in Italy, the sector failed to replicate that trajectory at the European level.

European real estate is becoming increasingly polarised, with capital concentrating on prime, ESG-compliant assets while secondary stock continues to face liquidity and pricing pressure. The market is witnessing a pronounced ‘flight to quality’, benefiting well-located, sustainable assets with strong occupier demand and resilient income profiles. On the pricing front, prime net yields are under moderated upward pressure in markets where recovery momentum remains subdued - most notably France and Germany - reflecting the combined effect of a tighter financial environment, perspectives of higher capital costs, and persistent uncertainty tied to geopolitical tensions.

Occupier demand remains concentrated on prime, ESG-compliant office assets, further reinforcing the flight-to-quality trend across European real estate markets. While overall leasing activity remains selective amid ongoing macroeconomic and geopolitical uncertainty, tenant requirements continue to favour high-quality space that supports sustainability targets, workplace quality and operational efficiency. In parallel, the increasing adoption of AI and digital technologies is prompting occupiers to rethink both workplace strategies and operational processes. As a result, prime assets in core locations are sustaining healthy leasing momentum and rental resilience, whereas secondary stock faces increasing obsolescence risk and weaker occupier demand, widening the performance gap across the market.

In logistics, leasing activity appears to have stabilised after the slowdown experienced over the previous years, with moderate increases in take-up volumes supported by improving occupier confidence. Despite growing leasing activity, net absorption remains weak - a sign that demand is driven primarily by the replacement of obsolete space with modern, future-proof facilities, rather than by a structural expansion of logistics capacity.

By H1 2026, European residential markets showed an increasingly differentiated performance, as the earlier boost from lower financing costs faded and mortgage rates broadly stabilised, with some renewed upward pressure. Transaction activity remained resilient but uneven across cities, with recoveries in several markets contrasting with declines in locations facing greater affordability constraints. Residential values generally continued to rise, although momentum varied and some markets recorded stabilisation or modest corrections, while structural undersupply and sustained demand remained the main supporting factors.