Market Radar Europe: The rise of private capital is shaping real estate recovery

Private credit shapes European real estate recovery

As we enter 2026, the real estate landscape is defined by a "cautious revival", mirrored in Savills latest research revealing investment volumes in Europe are expected to reach EUR 77 billion in Q4 2025 (a 12% yoy increase), driven by a flight to quality and the rise of private credit.

With traditional banks remaining selective, institutional "shadow banking" has stepped in, and debt capital is now considered the primary driver of the European property market recovery. Lenders are increasingly active in new business, leveraging flexible structures to squeeze margins and accelerate transactions.

This shift toward private credit is evidenced by a surge in high-profile deals across the continent this week. ICG recently provided a GBP 68 million whole loan to fund the expansion of Mira Tech Park in the UK, a major automotive R&D hub.

Similarly, Blackstone Real Estate Debt Strategies (BREDS) has issued a EUR 100 million loan to German self-storage pioneer Lagerbox, supporting its expansion in a high-growth sector.

The momentum is further bolstered by global partnerships and the diversification of alternative lending channels. Mubadala and Barings have formed a USD 500 million global real estate debt venture to capitalise on market dislocations and the retrenchment of traditional bank lenders.

Meanwhile, Blackstone has further diversified its role in the market by participating in its first EUR 212 million logistics loan previously held by Morgan Stanley.

These transactions highlight how private capital is not only filling the funding gap left by banks but is actively shaping the recovery by targeting resilient asset classes such as logistics and specialised commercial sites.

Hospitality rides the wave of travel growth

Speaking of resilient asset classes, Europe’s hospitality sector is currently riding a wave of sustained travel growth, as highlighted by CBRE’s inaugural European Hotels Destination Index.

The market is increasingly defined by a strategic divide: while major northern hubs like London and Paris provide unmatched liquidity and stability, southern leisure-driven markets - particularly in Spain - are emerging as high-growth investment hotspots.

This momentum is further bolstered by a favourable supply-demand imbalance, with new hotel construction remaining well below historical averages due to elevated construction costs and tight financing.

Recent transactions underscore a massive appetite for both budget-friendly platforms and landmark single assets. Tristan Capital Partners completed a EUR 400 million acquisition of the pan-European budget operator easyHotel in mid-2025, supported by EUR 300 million in financing from KKR.

While in the hostel segment, a&o Hostels recently integrated Schulz Hotels as part of a EUR 500 million expansion strategy to capture the rising demand from price-sensitive travellers. 

Additionally, high-profile single-asset deals have set new benchmarks, such as City Developments Limited (CDL) acquiring the Holiday Inn London Kensington High Street for GBP 280 million this month, and Bain Capital's major joint-venture acquisition of the Pullman Paris Montparnasse.

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