Market Radar Europe: Retail rebounds and Italy to lead Europe in 2026

Big-Ticket Capital Raising

Ample capital raising in the European real estate market is signalling a robust rebound for private equity. Leading the charge, Bain Capital recently closed its third flagship fund at USD 3.4 billion, while CBRE Investment Management surpassed its target to close a USD 1.6 billion secondaries fund - reflecting a growing institutional appetite for liquidity and secondary market plays.

Opportunistic strategies are also back in favour, evidenced by KKR securing USD 1.1 billion for its third European opportunistic vehicle and Bridges Fund Management closing its latest fund at over GBP 440 million.

On the financing front, lenders are demonstrating a renewed appetite for large-scale deployments, particularly in high-growth sectors like digital infrastructure and logistics.

A prominent lender club, including NORD/LB, recently orchestrated a massive EUR 1.8 billion data centre financing package, while Ares has doubled down on Irish data centres. In the logistics space, Hillwood Poland secured its largest acquisition financing to date - EUR 155 million from Bank Millenium to support the purchase of four Polish logistics assets.

Retail: The biggest comeback story of early 2026

Entering 2026, Europe's retail sector is being re-rated by institutional investors as a premier income-generating asset class, with total returns forecast to reach 9.5% this year, according to Knight Frank.

Stabilisation of e-commerce penetration - which has plateaued at approximately 28% - and a strategic shift toward physical "brand hubs" in prime urban locations are largely driving this retail renaissance.

In cities like Madrid, Milan, and Paris, competition for prime high-street units has intensified to the point where effective rents are beginning to exceed pre-pandemic levels.

This new cycle is characterised by a pragmatic pursuit of yield. With central bank rates holding steady, investors are increasingly drawn to retail’s superior income yields (averaging 5.7% to 6.4%), which currently outperform most other property types.

Retail parks and grocery-anchored assets remain the primary "occupational darlings" due to record-low vacancy rates (near 5%) and their resilience against inflationary pressures.

As the market moves away from broad expansion toward proactive asset management, the focus has shifted to stock selectivity, prioritising energy-efficient, ESG-compliant assets and those with the capacity for experiential integration.

In a definitive signal of renewed institutional confidence, Aware Super, Australia’s third-largest pension fund, announced this week the acquisition of a 31.3% stake in the European Outlet Mall Venture (EOMV) platform. The transaction, valued at approximately EUR 2.6 billion, sees Aware Super acquire the holding from Allianz accounts managed by PIMCO.

The deal gives the AUD 210 billion fund exposure to four premier outlet shopping centers across the Netherlands, Austria, and Italy, including the renowned Serravalle Designer Outlet.

This major transaction underscores a broader trend: European retail investment rose 16% year-on-year by late 2025, signaling that global capital is once again ready to bet big on the continent’s physical shopping landscape.

While mall deals capture the volume, "ultra-prime" high streets are seeing a flurry of owner-occupier activity, as luxury conglomerates like LVMH and Kering transition from tenants to landlords. In the opening weeks of January, these giants secured landmark "trophy" assets on Paris's Avenue des Champs-Élysées and London’s Bond Street.

Despite trading at record-low yields below 3%, these strategic acquisitions allow brands to hedge against escalating rents and secure permanent flagship footprints in a critically supply-constrained market.

Italian real estate to lead Europe in 2026

Also storming into 2026 is Italy’s real estate market, positioning itself as a European frontrunner for 2026, defying the shadow of the recent building permits scandal in Milan.

Transactions in the Italian market are projected to grow by 8.4% this year, reaching approximately EUR 175.8 billion. This growth rate comfortably outpaces major neighbours, including the UK (6.6%), Germany (4.1%), and France (3.2%).

Recent milestone transactions underscore the country’s resilience: The Valesco Group recently finalised its acquisition of Moncler’s landmark Milan headquarters for approximately EUR 500 million, while EQT Exeter has expanded its footprint with the purchase of a 130,000 square metre logistics portfolio comprising four assets in Northern Italy.

The residential market is expected to account for more than 80% of Italy’s projected 2026 real estate growth. While the judicial investigations into high-rise developments in Milan initially sparked fears of capital flight, they have now led to a new era of ultra-rigorous due diligence and regulatory clarity that appears to have bolstered, rather than deterred, long-term investor confidence.

Despite this optimism, the market faces a significant supply crunch. Newly built units accounted for just 10% of residential transactions in 2025 - well below the historical average - as urban regeneration projects remain stalled by administrative caution.
 

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Look out for a new edition of the GRI Institute's Market Radar Europe in January 2026!