29 Oct 2026
European RE market:Capital availability, rising return expectations and asset selectivity
Investors are raising their expectations, refinancing is becoming increasingly challenging, and real estate assets are now competing with infrastructure investments for capital.
- Στυλιανή Ρουχωτά | Styliani D. Rouchota
The challenge facing the European real estate market is no longer simply the availability of capital, but rather which assets are capable of attracting it and at what cost. Investors are becoming increasingly selective, required returns are rising, and access to financing is becoming more differentiated according to asset quality, geographic market, and investment risk.
This was the central takeaway from the discussion titled “Market Insights: Capital, Investment and Risk,” held as part of RICS BEES 2026, which recently took place in Athens.
The panel was moderated by Cecile Babcock, Principal Advisor, Global Investment at the Sustainable Real Estate Forum (SREF), and featured Hubert Joachim, Global Head of Investments and Asset Management at Amundi Immobilier; Dominique Moerenhout, CEO of EPRA; Jennifer Johnson, Deputy Secretary General of the European Mortgage Federation–European Covered Bond Council (EMF-ECBC); and James Halstead, Managing Director and CIO, European Value-Add Real Estate at BlackRock.
Capital Is Seeking Higher Returns
The era in which abundant and inexpensive liquidity could support a broad range of investments has come to an end. Despite the continued availability of capital, investment decisions are now governed by more stringent return and risk criteria. Hubert Joachim of Amundi highlighted the growing role of private capital and the need for investments to deliver returns above their respective benchmarks.
From BlackRock’s perspective, James Halstead described a two-tier financing market. High-quality real estate assets continue to attract competitive financing offers, while borrowing costs are rising for less attractive assets. This divergence is particularly significant for highly leveraged investors, who are facing the challenge of refinancing loans in an environment of higher capital costs.
Dominique Moerenhout of EPRA noted that real estate assets are no longer competing solely with one another for investment capital. Infrastructure, private credit and government bonds are competing for allocations within the same investment portfolios, compelling the real estate sector to reassess its risk-return profile.
At the same time, Jennifer Johnson emphasised the resilience of the European covered bond market, which continues to serve as a key mechanism for banks to raise capital and finance the housing market.
Southern Europe Is Gaining Ground
Geographic diversification is emerging as a decisive factor in investment strategies. Hubert Joachim identified Spain and Southern Europe more broadly as markets offering attractive prospects, particularly in the hotel and hospitality sectors. He also noted that opportunities remain in larger, more mature markets such as France and Germany. However, selecting the right country is not sufficient in itself. Local market knowledge, asset quality and the potential to generate additional value are becoming increasingly important factors in investment assessments.
Data centres, one of the fastest-growing segments of the real asset market, received particular attention. Despite strong demand, the development of new facilities is constrained by electricity availability, connectivity requirements and a shortage of suitable sites.
As James Halstead pointed out, rising demand does not automatically translate into readily available investment opportunities. Securing the necessary infrastructure is a critical prerequisite for the delivery of new projects.
Europe Has Capital, but Also Numerous Borders
Despite its financing challenges, Europe continues to offer significant advantages to international investors. Banks’ strong capital positions, well-developed covered bond markets, and structural needs for housing and energy-efficient building upgrades continue to underpin investment interest.
Nevertheless, fragmentation across European markets remains a significant obstacle.
Jennifer Johnson highlighted differences in national legislation, valuation frameworks and regulatory requirements, all of which increase the complexity of cross-border investments.
Dominique Moerenhout drew particular attention to Europe’s tax and legal complexities, which can discourage international capital, especially when compared with the more unified US market. At the same time, he emphasised that demographic shifts, urbanisation and growing housing needs are creating long-term investment opportunities.
Residential real estate remains an attractive asset class for institutional investors seeking stable income streams, while the need to upgrade existing building stock offers additional investment opportunities.
When Real Estate Becomes Infrastructure
One of the most significant issues raised was the gradual convergence of real estate and infrastructure. The development of data centres, alongside the growing importance of energy and connectivity, is changing the way real estate assets are assessed.
Dominique Moerenhout argued that data centres are an integral part of the real estate sector, despite their distinctive operational and technical characteristics. Their value is determined not only by the building or the land, but also by access to electricity, telecommunications networks and other critical infrastructure.
Similarly, Jennifer Johnson noted that investment interest in the covered bond market is extending beyond traditional residential mortgage financing to include infrastructure. This convergence is reshaping competition for investment capital, while also raising expectations of real estate asset managers. They are increasingly required to combine financial expertise with a deeper understanding of the operational and technical characteristics of each investment.