New Trends in the European Real Estate Market for 2025
The European real estate market is undergoing a period of profound transformation, influenced by constantly evolving economic, social, and cultural dynamics. From residential housing to offices, each segment of the sector faces unique challenges and opportunities. Here is a detailed analysis based on emerging trends identified for 2025.
Residential: A Constantly Growing Sector
Over the past decade, residential has consistently been one of the most appreciated sectors in the European real estate landscape. “In the long and short term, the fundamentals are clear. There is a demand-supply imbalance, practically applicable in all European cities,” says an industry expert. This imbalance is particularly evident in the rental sector, which has risen five places to rank fifth in the outlook for the coming year.
The student housing sector remains one of the most promising, ranking third overall. Purpose-Built Student Accommodation (PBSA) offers shorter contracts and less stringent regulation compared to traditional rentals. Additionally, during economic recessions, the number of students tends to grow, making this sector countercyclical. “PBSA offers higher returns compared to PRS [Private Rented Sector],” notes a fund manager. The increasing availability of university courses in English by many European universities is also attracting international students, further fueling demand.
On the other hand, the for-sale housing sector faces significant challenges. Although mortgage interest rates are declining, affordability remains a severe issue due to rising construction and land costs. “We depend on falling interest rates and real wage growth for people to return to buying,” laments a Nordic builder. Additionally, excessive regulation imposing high standards of quality and sustainability makes housing construction even more expensive.
Social and affordable housing occupy mid-table rankings (11th and 15th places, respectively), signaling investor interest in this segment. However, the combination of high construction costs and stringent regulations represents a significant challenge. According to UK industry leaders, “today, the entire spectrum of affordable housing requires subsidies to function.” Furthermore, rent control policies introduced by many governments are considered counterproductive. “The way to address affordability issues is not through rent control but by increasing supply,” says a research head.
Offices: A Challenged Sector
The office segment continues to be a challenging asset class, especially in the hybrid work era. Flexible/serviced offices and central city offices rank 22nd and 23rd out of 28 sectors for future prospects, while suburban offices remain anchored at the bottom of the rankings. The loss in value has been significant: “In offices, we have lost up to 60% of value,” complains one respondent.
Despite the difficulties, some experts foresee improvement in 2025. “When a demonstrable market floor is reached where transactions can occur, it will attract more long-term capital,” states the CEO of a REIT. London, for example, has adapted quickly, and similar dynamics are expected in other European cities.
One of the main factors driving demand for office spaces is location. Occupiers prioritize central locations offering services, amenities, and a vibrant cultural context. “You need to give me a reason to leave my apartment and go to work,” says a developer, emphasizing how the desire not to miss out on an opportunity (FOMO) plays a crucial role.
Attractiveness to talent and employee productivity are also considered fundamental aspects. The push towards an enhanced workplace experience, initiated by tech companies like Google, has now extended to the entire office market. While companies may require less space, they are willing to spend more to make offices more appealing to their employees. However, this has widened the gap between demand for high-quality office spaces in prime locations and secondary buildings in peripheral areas.
Future Outlook
The European real estate market for 2025 presents a complex landscape, with opportunities and challenges varying significantly across different sectors. While residential continues to show strong demand, especially in rentals and student housing, the office sector is still adapting to new workplace dynamics. Future strategies will need to balance the need for sustainability, affordability, and talent attraction with existing economic and regulatory challenges.
Success will depend on investors’ and developers’ ability to respond flexibly and innovatively to a continuously evolving market.
Fonti: ttps://www.pwc.com/gx/en/industries/financial-services/assets/emerging-trends-real-estate-2025.pdf
