Italy
Netherlands
Portugal
Spain
In the first quarter of 2025, according to the analysis by the Dils Research Team, European commercial real estate continued its upward trajectory, with investment volumes rising by 16% compared to the same period in 2024. This growth builds on the strong momentum recorded in Q4 2024, which had already marked a 30% year-on-year increase, confirming the ongoing recovery in capital markets.
Most monitored countries registered notable increases in investment activity. Portugal led the trend, posting an exceptional +154% year-on-year growth, largely driven by significant transactions in the hospitality and retail sectors. Conversely, the UK was the only market to record a decline, with volumes down by 14% compared to Q1 2024. However, this dip must be viewed in context: unlike other countries, the UK did not experience a significant contraction in capital inflows during the recent downturn, suggesting that current volumes reflect a stable phase rather than a recovery. Excluding the outliers of Portugal and the UK, all other monitored markets reported year-on-year increases ranging from 25% to 55%, indicating broadly consistent recovery patterns across the region.
In the first quarter of 2025, living emerged as the most attractive asset class, drawing the highest share of capital flows. This was largely driven by its strong presence in key markets such as Germany, the Netherlands, and Spain, where it remains the top choice among investors. Offices ranked as the second most preferred asset class overall and held the leading position in both France and the UK, reaffirming their significance in these markets. Meanwhile, hospitality demonstrated a more geographically concentrated investment pattern, with a strong focus on Southern Europe. It accounted for 24% of total real estate investment in Italy – the highest among all asset classes – and 23% in Portugal, where it ranked second, while it captured less than 6% of total investment flows in the Netherlands, Germany, and the UK.
The current phase of moderate growth is largely supported by improved financial conditions, as inflation aligning with long-term targets has enabled the European Central Bank to adopt a more accommodative monetary policy. Looking ahead, the outlook for 2025 remains mixed. On the positive side, the recent stabilization of yields has reinvigorated investment activity across several sectors. However, escalating geopolitical tensions and sluggish economic performance within Europe pose potential risks to market fundamentals and could undermine investor confidence.
In Q1 2025, office occupier activity remained relatively steady, with most monitored cities registering modest levels of demand. However, overall take-up volumes declined compared to the same period in 2024, reflecting a cautious approach from occupiers. At the same time, prime rents continued to rise, supported by a persistent flight-to-quality trend. Tenants increasingly prioritize energy-efficient, flexible, and well-located office spaces, sustaining demand in the upper segment of the market despite the overall slowdown in leasing activity.
The logistics sector continued its efforts toward stabilization following two years of declining occupier activity. In Q1 2025, most national markets recorded a recovery in take-up volumes, although figures remain well below pre-2023 levels. Among the strongest performers, France stood out with a 26% year-on-year increase, which helped to invert the negative trend. Conversely, Italy experienced a modest decline – notably, the Italian market has followed a distinct path compared to the broader European trend: it was largely unaffected by the sharp downturn of 2023 and has instead been gradually normalizing since 2024.
In parallel, the residential sector began to reflect the impact of 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 saw an uptick in residential transactions compared to 2023, though volumes still fall short of the levels seen in 2022.
