“European real estate market stuck in ‘zombie land’ with no signs of recovery – ReutersEurope’s commercial real estate market is not meeting recovery expectations, with property sales at a nearly decade-low. Annual sales in the first quarter of 2025 remained at €47.8 billion, more than half the figure from three years ago.
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DetailsSome investors and banks, recognizing that the outlook remains weak, are even starting to intervene to dispose of or restructure distressed assets, one executive said, adding, however, that a “continue and pretend” approach to troubled debt is still common.
This is a noticeable shift in sentiment since early 2025, when there were hopes for an end to the three-year downturn caused by the pandemic, but unpredictable US trade policy, the promise of greater returns in other private markets, and sellers’ refusal to accept lower prices have negatively impacted activity, the publication writes.
Annual commercial real estate sales in Europe in the first quarter of 2025 remained unchanged at 47.8 billion euros ($55.6 billion), more than half the figure of three years ago, according to the latest revised MSCI data.
Preliminary figures indicate a poor second quarter – cross-border real estate investment in Europe, the Middle East, and Africa fell by approximately one-fifth compared to the previous year to 17.2 billion euros, the worst April-June period in a decade, real estate agency Knight Frank reported, citing preliminary MSCI data.
Sluggish sales have affected most sectors, including heavily impacted offices, and even data centers, which were previously a positive point, although the supply deficit in the rental housing market continues to attract attention.
“We have a ‘zombieland’… no recovery, blocked assets, no return of liquidity,” said Sebastiano Ferrante, head of European real estate at US fund giant PGIM.
While logistics and hotels also presented buying opportunities, suburban offices and older shopping centers are also among the assets struggling to find buyers, Ferrante added.
Canadian company Brookfield asked bondholders to approve a loan restructuring secured by its London office tower CityPoint in April, according to a regulatory filing, after postponing a sale when offers did not meet expectations.
In Germany, Reuters reported last week, a manager put one of the country’s most famous properties, the Trianon skyscraper in Frankfurt, up for sale. This, it was stated, was a rare test for the fragile German market.
There is also fierce competition for funds from other private markets, such as credit.
Germany, Europe’s largest economy, has been particularly hard hit by the real estate downturn: sales fell by another 2% in the first half of this year, according to CBRE data.
“Transaction volumes will not increase. It will not start very dynamically,” said Konstantin Kortmann, CEO of real estate agency JLL in Germany, who expects a gradual recovery.
While still high interest rates mean real estate investors must be selective to make money, the prospect of international funds moving to Europe from the volatile US market could help, real estate executives said.
At least two German PGIM clients canceled planned real estate investments in the United States, reorienting their priorities to Europe and Asia, Ferrante said.
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