In its mid-year 2025 report, CBRE highlights a gradual stabilisation emerging in the European commercial real estate market. The sector is being buoyed by improved financing conditions and declining interest rates, factors which are stimulating investment activity and increasing the volume of completed transactions. This environment is fostering renewed confidence among investors and encouraging market participation.
Asset supply has expanded notably, as properties with maturing debt have come to market. This influx is creating new opportunities for institutional investors and funds, especially those focused on acquiring value-add assets with potential for modernisation and enhanced energy efficiency. Such trends are providing fresh avenues for strategic acquisitions across the continent.
According to CBRE, rental income has overtaken capital appreciation as the primary driver of investment performance in 2025. The greatest concentration of transactions is found within the logistics, infrastructure, and data centre sectors—industries that offer stable cash flows and align with contemporary ESG (Environmental, Social, and Governance) and sustainability standards.
In contrast, office and legacy retail assets continue to face difficulties stemming from oversupply. The average office vacancy rate across Europe remains elevated at 8–10%, which is restricting rent growth in traditional business districts. This persistent pressure is prompting investors to reconsider their strategies in these segments.
The logistics segment stands out for its robust performance. Demand in this sector continues to outpace supply, especially in locations close to major transport hubs and seaports. Vacancy rates in logistics have fallen to 3.5%, the lowest in five years, while rental growth has averaged between 5–6% during the first half of 2025. These figures underscore the sector’s resilience and attractiveness.
CBRE notes a significant increase in ESG-certified assets. Energy-efficient and certified buildings now account for 37% of all new transactions, up from 25% in 2023. The highest levels of adoption are observed in the Netherlands, Germany, and Nordic countries, highlighting a growing institutional commitment to sustainability in property investment.
Wider macroeconomic conditions are supporting this recovery trend. Most European economies are experiencing moderate GDP growth, and the European Central Bank has enacted four consecutive rate cuts by mid-2025. These reductions have led to lower borrowing costs and broadened access to credit, further underpinning market stability.
CBRE concludes that the European commercial property market is entering a recovery phase. Logistics, infrastructure, and data centres remain the most resilient sectors, whereas office and retail segments continue to be challenged by oversupply. The current environment lays a strong foundation for renewed investment activity throughout the latter half of the year.
Commentary from M24 Investment Division:
CBRE’s report effectively captures the market’s shift from downturn to stabilisation. The combination of falling interest rates and improved financing conditions is reviving investor activity. Notably, the structure of transactions is evolving, with a clear emphasis on income-generating assets—namely logistics, infrastructure, and data centres. Energy efficiency is now a decisive factor, with ESG-certified assets comprising 37% of new deals, confirming the growing institutionalisation of sustainability principles in investment strategies.
