Market Radar Europe: UK prime offices on top amid major 2026 recovery

UK prime offices to lead total returns in European real estate

The UK real estate market, particularly the prime office segment, is forecast to lead Europe in total returns over the next five years. AEW's 2026 European Annual Outlook projects that the UK will rank first among 20 leading European countries, delivering a total return of 10.3% annually over the 2026-2030 period. This strong performance is supported by relatively higher current yields and anticipated yield compression.

At a sector level, prime offices are expected to offer the highest returns across all property types, forecast at 9.3% per year. This figure is higher than shopping centres, logistics, and residential, which reflects strong occupier fundamentals and tightening yields for high-quality, sustainable assets. Overall, prime cross-sector rental growth is projected at 2.2% each year for 2026-30, fuelling income returns.

Leading global investment managers are backing this conviction with capital. For example, AEW, utilising German capital, acquired 95 New Cavendish Street in London for GBP 22 million this month, classifying it as a value-add opportunity and signaling that prime office assets are firmly back in the investment mix.

Renewed investment activity for 2026

The sentiment in European real estate is transitioning from cautious optimism to a more pragmatic outlook, with strong expectations for renewed investment activity in 2026.

According to the PwC/ULI Emerging Trends in Real Estate: Europe 2026 report, a majority of industry leaders anticipate that debt and equity availability will increase over the coming year.  This recovery is expected to be fuelled by capital from emerging investors, notably European and US family offices, private equity funds, and high-net-worth individuals (HNWIs).

Investment focus continues to gravitate towards sectors driven by long-term secular trends, while niche operational sectors are dominating the rankings, with data centres and new energy infrastructure leading the way.

Capital into Data Centres

European data centres are enjoying a massive inflow of capital from both technology giants and global infrastructure investors. Google has announced its largest-ever investment in Germany, committing EUR 5.5 billion through 2029 to build and expand data centres near hubs like Frankfurt to support its AI and cloud services.

Similarly, institutional money is rapidly deploying in the space, as seen in the joint venture between Spain’s ACS and BlackRock's Global Infrastructure Partners (GIP), which established a new data centre platform with an initial portfolio valued at EUR 2 billion. 

The sector is highly competitive and increasingly speculative. As capital pours in, land connected to reliable power grids near established markets like London, Frankfurt, and Dublin is trading at prices previously deemed unthinkable, pushing the yield on data centres in regions like Germany to the lowest among all property sectors.

The speculative fever is visible in developers securing land without guaranteed grid access, betting on future power capacity. This environment has led some financial analysts to draw comparisons to the 1840s railway bubbles, warning that projects priced on expectations of uninterrupted, high growth could risk overbuilding or rapid technological obsolescence.

European CRE values up for fifth consecutive quarter

Commercial real estate (CRE) values across Europe have demonstrated a measured, sustained improvement, rising for the fifth consecutive quarter in Q3 2025.

Data from Altus Group’s Q3 2025 Pan-European dataset analysis shows that property values increased by 0.6% in Q3 2025, mirroring the previous quarter’s gains, and marked a 2.9% year-over-year increase from Q3 2024. This broad-based growth is largely attributed to stronger cash flow fundamentals, which appreciated by 2.6%.

Among the four main sectors, residential was the strongest performer, with values increasing by 0.7% over Q2 2025, bolstered by robust cash flows. The office sector continues to be a laggard but shows signs of recovery, with values rising by 0.5% in Q3 2025 despite a significant 6.6% value decline year-over-year across Europe. 

Regionally, France was a standout performer, with property values rising by an impressive 6.3% year-over-year (y-o-y).

Look out for a full GRI Institute report on the CRE market following this week’s GRI Commercial RE Europe 2025 conference, incorporating GRI Data Centres Europe 2025.

European logistics market rebounds in Q3 2025

The European logistics market confirms its status as one of the continent's most resilient asset classes, with investment volumes strengthening and occupational demand rebounding significantly through the second half of 2025, according to Savills latest research.

While investor appetite for real estate remains selective and cautious, capital is actively flowing into high-quality assets, driving investment volumes above pre-pandemic five-year averages.

Markets such as the Czech Republic (up 120.9% y-o-y) and Romania (up 85.9% y-o-y) have reported notable increases in take-up, underscoring the shift toward Central and Eastern European logistics hubs.

Look out for a new edition of the GRI Institute's Market Radar Europe next week!