Capital Edges Back Into Europe’s Real Estate Market

European property investment volumes remain well below the highs of the last cycle, but signs are emerging that capital is gradually returning to core markets and asset classes. A headline signal came in July when Union Investment completed the off-market sale of Finsbury Circus House in the City of London to DARE, a joint venture between Aware Super and Delancey. Trade press reports guided pricing around £140 million, making it one of the most significant prime office deals in London this year. For Union Investment, the disposal marked a first major transaction under Karim Esch, who joined the company’s management board on 1 July with responsibility for investment management.

Esch believes the market is entering a new phase. “Yes, a turnaround is in progress – at least in certain markets and asset classes,” he said. He argues that after a decade of artificially low rates, real estate is returning to normal conditions where it is a core component of portfolios but no longer a substitute for fixed income.

The wider market picture reflects this cautious optimism. According to Savills, European investment volumes reached roughly €95 billion in the first half of 2025, an increase of about 11 percent compared with the same period last year. BNP Paribas Real Estate, using a narrower scope, reported €76.7 billion, also slightly higher than in 2024. In Germany, CBRE tracked €14.2 billion of transactions in the first half, a two percent decline year on year. The divergence underlines the patchy recovery: while cross-border portfolios and gateway cities are seeing renewed attention, other markets remain subdued. David Hutchings, Head of Investment Strategy for EMEA Capital Markets at Cushman & Wakefield, said the market is already in the middle of a new cycle that will continue to accelerate over the course of the year. James Burke, Director of Global Cross Border Investment at Savills, added that several large portfolios brought to market over the summer had lifted confidence.

Esch sees logistics, grocery-anchored retail and hotels as sectors where buyers and sellers are already finding common ground. Residential is also moving, while shopping centres are regaining resilience as owners add food retail and improve occupancy. Burke points to renewed investor interest in retail in markets such as Spain, Italy and the Netherlands. Offices remain more selective. Space-efficient layouts, flexible fit-outs and strong ESG credentials are in demand, but secondary assets are harder to trade. “We’re seeing a kind of hotelisation of the office world, with more emphasis on community space and amenities,” Esch said.

He also believes Europe is well placed to attract international capital, particularly as some investors look for alternatives to the US. Economists abroad expect Germany to play a leading role in Europe’s recovery, and foreign capital will follow. Core and core-plus investors, including family offices and sovereign wealth funds, are increasingly active alongside opportunistic players, according to both Union Investment and Cushman & Wakefield. Hutchings noted that the market is becoming more balanced as the number of long-term holders willing to transact increases.

For Esch, the message to clients is clear: real estate remains a long-term component of diversified portfolios. “Anyone who redeems their fund units now is getting out just when property prices are rising again. It’s better to invest continuously in real estate through all cycles,” he said.

Source: Union Investment
Photo: Karim Esch, Chief Investment Officer (CIO), Union Investment Real Estate GmbH