European Real Estate in a changing investment landscape

The discussion examined the availability and cost of capital, the challenges of refinancing, the relative attractiveness of European real estate, and the changing boundaries between property, infrastructure and other real assets.

Capital remains available, but investment criteria have become more demanding

Capital remains available in European real estate, but higher financing costs and more selective investors are making investment decisions increasingly demanding. Hubert Joachim highlighted the growing role of private capital alongside bank financing, emphasising the need to deliver returns above benchmarks. James Halstead noted that financing remains competitive for established assets but becomes more expensive for less favoured segments, amid changing market sentiment. Jennifer Johnson underlined the resilience of covered bond markets in supporting bank lending, while stressing investors’ preference for secure investments. Dominique Moerenhout highlighted competition from infrastructure, private credit and government bonds, alongside growing refinancing challenges, particularly for highly leveraged assets. Overall, the panel emphasised the importance of disciplined capital allocation, financial resilience and risk-adjusted returns.

Investment opportunities are increasingly sector-specific

Investment opportunities across European real estate vary significantly by location and sector, requiring selective capital allocation based on market fundamentals and expected returns. Hubert Joachim identified Spain and Southern Europe as attractive markets, particularly for hospitality and hotels, while France and Germany continue to offer opportunities. James Halstead highlighted strong demand for data centres but noted the limited availability of suitable investment opportunities. Joachim emphasised their growing dependence on infrastructure, including power and connectivity. The discussion underscored that successful investment requires identifying viable assets, assessing infrastructure constraints and balancing risk against potential returns.

Europe offers significant potential, alongside structural complexity

Europe continues to offer significant investment opportunities, supported by well-capitalised banks, mature covered bond markets and growing demand for housing construction and energy-efficiency renovation. However, as Jennifer Johnson highlighted, the fragmentation of European property markets, differences in national legal frameworks and valuation practices, and varying regulatory conditions create challenges for cross-border investment. Although covered bonds contribute to market transparency and support banks’ lending capacity, investors must carefully assess local market conditions and the regulatory environment when allocating capital across the region.

Dominique Moerenhout similarly emphasised Europe’s attractiveness as an investment destination, while noting that its complex tax and legal systems can make it less straightforward for international investors than the more unified framework of the United States. He highlighted the growing importance of thematic investment strategies focused on long-term structural trends, including demographic change, urbanisation and housing demand, with residential property offering opportunities for investors seeking stable income and attractive yields. Overall, the discussion underscored the need to combine a pan-European investment perspective with detailed local market knowledge to navigate regulatory complexity, identify sector-specific opportunities and allocate capital effectively across diverse European markets.

The boundaries between real estate and infrastructure are shifting

The discussion also highlighted the evolving nature of the real asset investment landscape, where the boundaries between real estate and infrastructure are becoming increasingly blurred. Dominique Moerenhout argued that data centres should be recognised as part of the real estate sector, despite not always being fully reflected in traditional regulatory and sector classifications. He noted that real estate has become increasingly operationally intensive, with asset performance depending not only on location and physical characteristics but also on operational efficiency, service delivery and access to essential infrastructure.

Jennifer Johnson observed that, although covered bond markets have traditionally focused on residential mortgages, investor interest is expanding towards other asset classes, including infrastructure. This reflects a broader evolution in investment preferences and financing needs. James Halstead’s remarks on data centres further illustrated the challenges of translating strong market demand into viable investment opportunities, particularly where substantial infrastructure requirements and limited suitable assets constrain capital deployment. Overall, the discussion pointed to the growing relevance of a broader real assets perspective, recognising the interconnected nature of property, infrastructure and operational businesses in shaping investment strategies.