According to the latest Emerging Trends in Real Estate® Europe 2026 report by PwC and the Urban Land Institute (ULI), presented yesterday in London, the proportion of real estate executives concerned about the impacts of deglobalization has more than doubled over the past two years, reaching 70%. Concerns about broader international political instability, including in Europe, stand at 90%, worries about escalating global conflicts at 86%, and 77% express concern regarding Europe’s economic growth prospects.
In an environment of uncertain economic recovery, uneven demand, and heightened concerns over construction costs, resource availability, and regulatory requirements, business confidence has slightly declined to 45% (from 50%). Nevertheless, expectations for improved profitability by the end of 2026 have increased to 50% (from 46%), indicating cautious but tangible optimism.
A gap continues to exist between supply and demand prices. In this context, much of the capital flowing into real estate is coming through the “debt route,” offering better risk/return prospects compared to equity, especially for core assets. Notably, expected equity inflows into real estate are coming from less traditional sources, including private investment funds, high-net-worth individuals, and European and U.S. family offices.
According to Simon Chinn, Vice President of Research & Advisory Services at ULI Europe, this year’s report “highlights a resilient sector that continues to navigate the uncertainties of recovery and operational and investment challenges. Leadership sentiment has shifted from cautious optimism to a more realistic, practical approach to adapting to current conditions.” He adds, “The market still offers significant opportunities through innovation, differentiation, and leadership, despite shifting perceptions around sustainability, even as decarbonization remains central to the agenda.”
Gareth Lewis, Director at PwC, adds that “the European real estate market is undergoing a challenging but transformative period as traditional tailwinds weaken. However, optimism remains strong, with sector leaders viewing the current environment as an opportunity to redefine the industry’s significance and renew its value proposition to the market.”
Cities and Sectors: What Remains Stable and What Is Changing
Increased volatility and differing growth prospects across countries have elevated location choice as a critical factor in investment decisions. Investors are focusing on mature, institutionally stable markets with high liquidity and positive long-term prospects.
For the fourth consecutive year, London, Madrid, Paris, and Berlin maintain their leadership in real estate investment and development prospects in Europe, while also registering the highest transaction volumes according to MSCI data.
Amsterdam rose to fifth place, Milan remained seventh, and Barcelona re-entered the list in eighth place. German cities continue to hold strong positions, though they have slightly declined due to an uncertain economic environment and market pressures, particularly in the open-ended real estate fund sector. Despite these challenges, cities such as Berlin remain attractive for investment, with solid fundamentals in the residential and logistics sectors.
Athens Falls Four Places
In contrast, Athens dropped four positions, ranking 26th this year, down from 22nd, which it had maintained steadily over the past five years. This reflects the challenges of the Greek market amid increased competition and investor caution.
Lisette van Doorn, CEO of ULI Europe, emphasizes that “the real estate market is in a highly interesting but challenging phase, as structural changes create unprecedented opportunities: from the energy transition and digitalization to strengthening European defense and knowledge sectors. Successful players are those who understand fundamentals deeply, actively manage their assets, and work closely with users, adopting a long-term value strategy.”
Artificial Intelligence as a Transformation Accelerator
This year’s survey identifies Artificial Intelligence (AI) as a rapidly growing driver of change. Seventy-five percent of respondents report already using AI or machine learning solutions, compared with 51% last year.
Within the next 18 months, AI is expected to be widely applied across marketing and leasing (90%), property management (87%), design and development (84%), and operational and administrative processes (86%).
ESG: Balancing Long-Term Commitments with Short-Term Pressures
Decarbonization remains a key industry goal; however, perceptions of the ESG agenda are evolving. Increasing regulatory complexity and bureaucracy have in some cases prompted the reassessment of approaches.
Approximately half of respondents report adjusting their strategy due to macroeconomic uncertainty, while fund managers are now required to clearly demonstrate the link between sustainability and investment performance.
Although 85% still consider ESG important (down from 89% last year), those treating it as a core strategic driver for the next five years have declined to 21% from 40% last year.
According to Jean-Baptiste Deschryver, Head of Real Estate at PwC EMEA, “Geopolitical uncertainty remains the major disruptor—but it is pushing the sector to think more strategically about risk and resilience. The role of real estate is being redefined: no longer a passive asset, but a dynamic infrastructure that can meaningfully contribute to enhancing European competitiveness.”
The report will be presented at a special event on 10 December at Megaro Karatza (Aiolou 82-84), Athens.
