Insight New opportunities in European real estate: H2 2025 and beyond

Invesco Opens in a new tab
4 November 2025
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Key takeaways

  • Positive growth:

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

  • Strength in rents:

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

  • Capital shift from US:

    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

  • Investment risks

    The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.

    Alternative investment products may involve a higher degree of risk, may engage in leveraging and other speculative investment practices that may increase the risk of investment loss, can be highly illiquid, may not be required to provide periodic pricing or valuation information to investors, may involve complex tax structures and delays in distributing important tax information, are not subject to the same regulatory requirements as mutual portfolios, often charge higher fees which may offset any trading profits, and in many cases the underlying investments are not transparent and are known only to the investment manager. There is often no secondary market for private equity interests, and none is expected to develop. There may be restrictions on transferring interests in such investments. 

    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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