The European market view: Does uncertainty reign?

Breaking economic patterns: Europe’s real estate landscape

Today’s European market view is of a picture scarcely imaginable a few years ago.

2025 in Europe has a macroeconomic backdrop scarcely imaginable a few years ago: German stimulus spending, Greece in budget surplus and historically reliable real estate correlations – such as that between GDP and prime rents – behaving differently. And that’s on top of still to-be-determined new tariffs faced by Europe’s exporters. As we’ve shared in our recent ISA Briefings, it is helpful to “work backwards” to investment strategy based on what is actionable amidst all the noise. 

Initial bond and currency market reactions, several highlighted in our latest Europe Market View, imply a relative shift towards Europe as a safe haven. These changes are having ripple effects for European real estate. Easing eurozone borrowing costs have made debt more accretive to go-forward returns, supporting a cautious recovery in investment activity. A stabilization in real estate yields, and the return of yield compression in some segments, are signs of the beginning of a new real estate cycle. The MSCI Europe Property Index capital values have increased for two consecutive quarters following eight quarters of decline. 

Europe all property inflation-adjusted rent growth has now been positive for six quarters. The wider office market is undergoing a rebalancing cycle with slowing building starts and rising conversions of obsolete offices to other uses helping to keep markets in balance. Conversions in Europe reached 1.4% of stock in 2024 compared to the long-term average of 0.9% p.a. 

We graph these trends in our latest LaSalle Europe Market View chartbook. We also look ahead to sharing our ISA Outlook 2025 Mid-Year Update, as we move into the second half of an eventful year.