The year marked a transition for European development. According to the Savills European Real Estate Outlook, the market has definitively moved away from a growth model based on cheap capital and entered a phase of structural risk reassessment. Volumes of new development launches declined across all major EU economies, while activity shifted from speculative projects toward formats with a higher degree of cash-flow predictability. 

The key factor throughout the year remained the cost of financing. Elevated ECB interest rates directly affected feasibility models: developers were forced to revise project timelines, development density and capital structures. As a result, a number of projects were put on hold at the pre-development stage, particularly in the office and mixed-use segments in non-prime locations. 

According to Savills, residential real estate proved to be the most resilient segment, especially rental-oriented projects. Supply shortages in major EU cities continued to support demand; however, even in this segment capital requirements tightened and income projections became more conservative. In logistics, interest in development remained, but new projects were launched mainly where pre-let agreements were in place. 

The report also highlights a transformation in deal structures. The role of joint ventures, forward funding and forward commitments increased significantly. Investors sought to enter projects at earlier stages while strictly defining risk allocation, budget control and construction timelines. For developers, this resulted in lower margins but simultaneously provided access to capital amid constrained bank lending. 

From a regional perspective, Savills notes the sharpest decline in development activity in Germany and Northern European countries, while Southern Europe demonstrated relative resilience due to a lower cost base and tourism-driven formats. 

Overall, the year’s results point to the emergence of a new normal for European development: lower volumes, higher selectivity, more complex capital structures and a greater role for partnership models. The market is shifting from a phase of expansion to one of disciplined development, where risk controllability — rather than speed of growth — becomes the key asset. 

Commentary from M24 Investment Division: 

The shift toward structural risk reassessment is evident across all segments. Against the backdrop of tighter financing conditions and a decline in speculative construction, the market is seeing a higher share of partnership models and an increased role for pre-let contracts. Core deal formats are evolving toward forward structures and early investor participation, accompanied by stricter control over project parameters.