Insight

New opportunities in European real estate: H2 2025 and beyond

4 November 2025
Invesco
Axel Towers round modern skyscraper office buildings with blue sky and clouds background

Key takeaways

Positive growth

1

European real estate is entering a recovery phase despite recent shifts in global trading and economic growth patterns.

Strength in rents

2

European real estate income remains strong and stable due to high demand and limited supply.

Capital shift from US

3

Tariff concerns and currency risks are driving investors away from US real estate, with capital being reallocated to markets like Europe.

Both European and UK real estate markets are showing positive year-on-year capital value growth, leading a global recovery after recent interest rate corrections. This rebound is occurring despite global economic challenges, including disrupted trade flows and declining GDP.

Seeing resilience and diversification in European real estate income

  • Despite recent shifts in capital markets, European real estate continues to show strength in rental income. 
  • Limited supply and steady demand are keeping leasing activity strong, particularly for high-quality office and logistics assets, as occupiers continue to prioritise ESG-compliant and centrally located buildings. 
  • In addition, and in contrast to practices elsewhere in the world, European commercial real estate leases typically link rent to inflation indices (such as CPI or HICP), helping preserve real income over time.
  • In a volatile macroeconomic environment, such as now, this mechanism provides real estate investors with inflation risk mitigation and income growth during the lease.

European real estate debt provides income-driven diversification 

  • Our current outlook is for stability in European interest rates, and we expect this to result in relatively flat real estate yields. The resulting focus on income as a driver of real estate returns is also leading investors to consider allocations to real estate debt.
  • By receiving interest payments, real estate debt is an income-based investment and offers diversification relative to real estate equity.
  • In addition, real estate debt income streams provide investors with quarterly dividends, potential downside risk mitigation because of the underlying security, and the use of floating-rate loans which can also offer inflation protection.

Discover Invesco’s European real estate convictions for 2026

Invesco sees strong potential for European real estate to outperform versus recent history in late 2025 and into 2026. This view is based on clear evidence of market recovery, resilient and diversified income streams compared to other asset classes, and robust structural drivers of demand, which support occupancy and drive real rental growth.

We are focusing strategic investments into opportunities that maximise income growth potential and attempt to minimise reliance on real estate yield movements. In particular, we are targeting income growth potential that is underpinned by long-term structural drivers of occupier demand or active asset management opportunities.

Read more about our convictions for 2026 below.

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Related insights

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    Important Information

    Data as at 08.09.2025 unless otherwise stated. Views and opinions are based on current market conditions and are subject to change.

    This is marketing material and not financial advice. It is not intended as a recommendation to buy or sell any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication.

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