According to market analysts, following three years of high volatility, rising interest rates, and changes in user behavior, the real estate market is now showing clear signs of stabilization and renewed investor interest.
AEW forecasts that during the period 2026–2030, prime property yields across the 20 European markets it covers will average 8.4% per year, with the United Kingdom, Central and Eastern Europe, and Spain leading the way.
The report notes that investment volumes in European real estate are expected to reach €200 billion in 2025 and €220 billion in 2026, up from €185 billion in 2024. The gradual convergence of asking and achieved prices is reopening opportunities for large-scale transactions, while improving investment sentiment in office and retail sectors complements the already strong momentum in logistics and residential properties.
Hans Vrensen, Head of Research & Strategy Europe at AEW, emphasizes: “The European real estate market is showing clear signs of recovery. Prime asset yields are expected to decrease by approximately 30 basis points by 2030, despite anticipated pressures from government bonds. The outperformance of real estate relative to bonds, at 160 basis points, is expected to remain stable, sustaining interest from multi-investor portfolios.”
The current property–bond yield spread stands at 160 basis points, approaching the pre-quantitative easing historical average, which is seen as encouraging for reactivating institutional investors.
The report also highlights noticeable improvements in core occupancy fundamentals. For offices, the vacancy rate is projected to peak at 8.1% by the end of 2025, with a gradual decline to 6.3% by 2030, as new supply remains limited. The strong differentiation between central and non-central offices is expected to diminish, with users increasingly favoring quality and energy-efficient buildings regardless of location.
For industrial/logistics properties, the vacancy rate rises to 5.6% in 2025 from the historical low of 2.5% in 2022; however, reduced developer profitability limits new construction. As a result, the vacancy rate is expected to fall again to 4.1% by 2030, maintaining logistics as one of the strongest market sectors.
Regarding residential properties, AEW analysts note that the sector remains the fastest-growing in terms of rental income. They forecast an average annual increase of 3.2% between 2026 and 2030, driven by chronic supply shortages and rising demand from younger populations, international students, and professionals.
In retail, high street stores are expected to grow by 1.6% annually, while shopping centers, through repricing and gradual footfall growth, are forecasted at 1.2% per year, marking a gradual return of investment interest after years of underperformance.
Favorable Financing Environment
AEW notes a significant improvement in financing conditions. In the Eurozone, borrowing costs stand at 3.9%, well below prime property yields (5.2%), creating positive leverage for investors. In the UK, despite higher borrowing costs, yields remain attractive due to greater yield compression. Debt funds and banks are increasing their activity, while the availability of back leverage improves investors’ options.
Analysts also report that the Debt Funding Gap in Europe is projected to decrease by 18%, to €74 billion for 2026–2028, indicating that refinancing challenges are easing—though France remains an exception, with a 20% increase in the funding gap.
AEW Sector Yield Forecasts:
Prime Offices: 9.3% per year – the strongest sector in Europe
Shopping Centers: 8.6% per year – returning to investor focus
Logistics and Residential: steady and predictable returns
For the United Kingdom, yields are projected at 10.3%—a top performance due to high current yields and expected yield compression. Central and Eastern Europe are forecast at 9.1%, supported by strong income returns, while Spain shows high potential due to faster rental growth.
Founded in 1981 by Peter Aldrich, Tom Eastman, and Mark Waltch, AEW is one of the world’s largest real estate managers, with €73.4 billion/$86.3 billion in assets under management, including €35.6 billion in Europe (as of September 30, 2025). AEW represents the real estate management platform of Natixis Investment Managers, one of the largest global asset managers.
