Home Insights Real estate Europe CRE deal volume down in 3Q, but green shoots emerge
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Europe CRE deal volume down in 3Q, but green shoots emerge

Market Response: Real Estate

October 31, 2025 | 2 min read
Rich Hill
Global Head of Real Estate Research & Strategy
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MSCI Real Capital Analytics’ latest release on European commercial real estate (CRE) volumes showed that the market is still finding its footing. Transaction activity fell -3% year-over-year in Q3 2025 to €45.6 billion, below the €50.7 billion quarterly average of the first half. Year-to-date, volumes were flat at €146.9 billion, a clear contrast to the U.S., where deal activity has rebounded sharply and is up +17% over the same period.

The disconnect is unusual. Historically, CRE transaction volumes in the U.S. and Europe have moved in tandem, and when gaps emerge, they tend to normalize quickly. Signs are now emerging that Europe may be on the cusp of doing just that. The number of European transactions under contract in October reached its highest level since 2022, and the Q3 2025 INREV Consensus Survey showed a meaningful rebound in investor sentiment, driven by improved financing conditions and increasing market liquidity.

  3Q25 YTD
Office +5% +3%
Industrial -29% -8%
Retail -13% +4%
Apartment -24% -9%
Hotel +11% -9%
Data Centers +15% -1%
Sr. Housing -14% +41%

Resilience in residential, early office recovery

Residential investment was a notable bright spot of the October release, reflecting investor rotation toward counter-cyclical, supply-constrained assets. The sector’s resilience was underscored in the INREV Consensus Indicator Survey, where residential ranked as the most preferred sector in Q3 2025 for the third consecutive quarter. Reflecting this momentum, residential-focused European funds delivered top-tier total returns: +2% in Q2 and +8% year-over-year.

While office investment remained close to historical lows in absolute terms, there is the emergence of some green shoots. Volumes rose 5% in Q3 and 3% YTD, with London and Paris central business districts leading the way. Prices are rebounding, and prime rents are showing notable growth in 1H25. Similar signs of stabilization are emerging in supply-constrained markets, such as Madrid and Amsterdam, as well.

Adjacent to the traditional real estate sectors, data centers continue to gain momentum. Transaction volumes rose by +15% in Q3 and were flat on a year-to-date basis, an impressive result given the broader market softness. Data centers increasingly blur the lines between real estate and infrastructure: they offer long-term contracted revenue, essential service functions, high barriers to entry, and leases that are based on power availability rather than traditional CRE that’s measured by the size of the usage area. These attributes make them especially attractive as Europe ramps up digital and energy infrastructure investment. As part of real estate, infrastructure, or “digital real asset” strategies, investors should expect data centers to continue seeing inflows in the quarters ahead. That said, these transactions are typically large and occur infrequently, making quarterly fluctuations volatile and not necessarily indicative of medium- to long-term trends.

Bottom line

Europe’s CRE market may be lagging the U.S., but momentum is building beneath the surface. With liquidity returning, investor sentiment improving, and capital flowing into resilient and forward-looking sectors such as residential, prime offices, and data centers, the foundations for recovery appear to be taking shape. If current trends persist, Europe’s transaction activity is well-positioned to accelerate into 2026, potentially closing the gap with the U.S. and emerging on firmer footing.

Real estate
Disclosure

Investing involves risk, including possible loss of Principal. Past Performance does not guarantee future return. Potential investors should be aware of the risks inherent to owning and investing in real estate, including value fluctuations, capital market pricing volatility, liquidity risks, leverage, credit risk, occupancy risk and legal risk. All these risks can lead to a decline in the value of the real estate, a decline in the income produced by the real estate and declines in the value or total loss in value of securities derived from investments in real estate. Commercial real estate (CRE) investments carry several inherent risks, including those related to the economy, interest rates, and tenant behavior. These risks can impact property values, rental income, and overall investment returns.  International investing involves greater risks such as currency fluctuations, political/social instability, and differing accounting standards.       

Views and opinions expressed are accurate as of the date of this communication and are subject to change without notice. This material may contain ‘forward-looking’ information that is not purely historical in nature and may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader.

The information in the article should not be construed as investment advice or a recommendation for the purchase or sale of any security. The general information it contains does not take account of any investor’s investment objectives, particular needs, or financial situation.

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