Prime logistics yields have stabilized in many markets and are starting to compress in cities like Madrid and Amsterdam. The retail sector, following significant repricing in the last years, is drawing renewed investor interest, while the office sector, supported by a limited supply of ESG-compliant prime assets, remains a priority for domestic investors.
Meanwhile, significant capital is ready to be deployed, particularly in the value-add space, with core capital gradually returning. Private investors have become an important source of capital, diversifying their focus across asset classes.
Mike Bowden, Managing Director & Co-Head of Capital Markets, Europe at Knight Frank, said: "As we look to 2025, Europe's real estate markets are in an exciting position, poised for recovery. Stabilizing valuations and a potential shift in monetary policy are setting the stage for a recovery and bringing forth cautious optimism from investors.”
In the Czech Republic, expected deal closures by year-end or early 2025 are likely to surpass last year's volumes, boosting investment activity further into next year. Domestic buyers maintain dominance with over 80% market share, a trend expected to continue into 2025.
Meanwhile, office space demand is set to decline further in 2025, impacted by headcount reductions in the IT&C sector, the largest local driver of demand, and tax increases affecting the economic climate.
Rental rates, which have risen by €1-2/sqm in key locations over recent years, are expected to stabilise in 2025. Future increases depend on the economic performance, but new projects scheduled for 2026-2027 are already quoting rents approximately €2/sqm higher than existing properties.
On the German market, easing monetary policy is expected to support investor activity, with rising take-up of ESG-compliant office spaces driving prime rental growth.
At the same time, the French market is entering a new cycle, with retail and logistics sectors showing growth potential amid a rebound in household consumption.
Across Italy, transaction volumes are projected to rise to 10-year average levels, with sustained interest in logistics, residential, and hotel assets.
In Spain, economic momentum is driving growth, with prime rents expected to rise across high-demand sectors like offices and logistics.
