European property values extend gains in the second quarter

The picture that is emerging points to a European real estate market that continues to recover, but at different speeds across property categories, as investors increasingly assess the prospects of each sector on a more selective basis.

More specifically, the pan-European Altus Group sample recorded a 0.3% increase in commercial property values in Q2 2026, compared with a 0.6% increase in Q1. On an annual basis, values remain 1.9% higher.

The continued increase in values indicates that the market has entered a phase of stabilisation following the period of significant pressure caused by rising interest rates and higher financing costs. However, the slower pace of appreciation suggests that the recovery is not uniform across the market.

The Q2 2026 dataset comprises pan-European open-ended diversified funds, with approximately €30 billion in assets under management.

Greater Divergence Across Market Segments

During the second quarter, the performance of European real estate was characterised by increasing divergence among individual property categories.

Residential: The residential sector remained the strongest-performing category for another consecutive quarter, with values increasing by 0.7% quarter-on-quarter. Although cash-flow growth slowed compared with the first quarter, continued rental growth supported valuations. On an annual basis, values increased by 3.3%, the strongest performance among the major property categories.

Industrial: Industrial and logistics properties recorded a more modest increase of just 0.1% in Q2. Slower rental growth resulted in lower cash-flow growth, falling from 1.1% in Q1 to 0.3% in Q2, while a modest expansion in yields offset part of the positive impact. On an annual basis, values increased by 1.8%, compared with 2.8% in the preceding 12-month period, highlighting the weakening momentum in the sector.

Office: The office market remained the weakest-performing of the major property categories. Values were broadly stable in Q2, as limited cash-flow growth and lower capital expenditure assumptions were offset by further yield expansion. On an annual basis, values increased by just 0.8%. Germany weighed significantly on the sector’s performance, as it was the only market in the sample where values declined over the past year.

Retail: Retail properties recorded an increase of 0.5% in Q2, above the market average. Unlike other sectors, the increase was driven primarily by yield-related factors rather than cash-flow growth. The sector was also the only one to experience yield compression over the past year, contributing to a 2% annual increase in values. As a result, retail continues to rank above industrial and office properties in terms of performance.

Other property: The “other” category continued to significantly outperform the overall market. Values increased by 2% in Q2 and by 6.5% year-on-year. Strong rental growth, combined with sustained investment demand—particularly for student accommodation—has driven the performance of this category, with both yields and cash flows reaching levels significantly above the average for the overall property market.

At the same time, the gradual easing of financing-cost pressures is providing support for valuations, although the market remains in a transitional phase.

Stabilisation, but Not a Uniform Recovery

The Q2 figures indicate that the European property market continues to move towards stabilisation in asset values, although no uniform trend has emerged across all sectors.

The differing performance of individual segments is expected to remain a defining feature of the market in the period ahead, as investors weigh demand, yields, the cost of capital and broader macroeconomic prospects.

This environment is placing even greater emphasis on asset quality and sector selection when making investment decisions in the European real estate market.