Stronger European and U.S. sentiment: Fundamentals lead the way

Debt markets a source of strength.

September 10, 2025 | 2 min read

Rich Hill

Global Head of Real Estate Research & Strategy

European real estate sentiment turned a corner in 3Q25. INREV’s Consensus Indicator climbed to 56.4, its first rise in three quarters and second-largest gain since launch in 2023. The improvement was broad-based across sub-indicators, led by financing, and it aligns with stronger global sentiment signals from both the U.S. and Europe. The message: fundamentals are back in focus, and sentiment is stabilizing.

Details

On September 9, 2025, INREV released its 3Q25 Consensus Indicator. As a reminder, INREV is the leading association for the unlisted real estate industry in Europe, and its diffusion index measures market sentiment on a 0–100 scale: readings above 50 signal expansion, 50 indicates stability, and below 50 contraction.

Sentiment strengthens

INREV’s latest survey highlights a meaningful shift in sentiment. The headline index advanced to 56.4 from 52.2 in the prior quarter, a gain that stands out as the second-largest in the survey’s short history. More importantly, this was the first increase in three quarters—an indication that confidence is beginning to rebuild after a stretch of hesitation.

Momentum was broad-based across the index. Financing conditions led the way, with the sub-indicator reaching 67.3, the highest reading ever recorded by the index and aligns with our view that global CRE debt markets remain highly liquid across a broad range of lenders. Investment liquidity also showed a sharp rebound, improving by nearly eight points to move back into expansionary territory. Leasing and operations slipped slightly to 58.1, but even that figure keeps it one of the strongest categories overall.

Fundamentals back returns

Survey respondents also underscored the role of fundamentals. Nearly four in five expect rental growth to be the primary driver of 4Q 2025 performance, which aligns with our thesis from Back to Basics, where we argued that property and market selection—not financial engineering—will be the primary drivers of total returns. INREV’s own performance data from the second quarter showed total returns of 1.54%, split between 1.02% income return and 0.52% capital growth. (For a deeper dive, see our report Single-sector real estate funds outperform in Europe)

The European data are consistent with sentiment elsewhere. The Real Estate Roundtable’s Sentiment index rose 13 points to 67, with the forward-looking measure climbing to 71, suggesting stabilizing operating conditions – occupancy and demand holding steady, values finding a floor, and expectations for modest, sector-led growth despite challenges in weaker property types. Likewise, the CREFC finance index jumped nearly 30% in the second quarter, decisively back above its neutral baseline after a sharp fall earlier in the year.

Bottom line

This is the first meaningful inflection in European real estate sentiment in nearly a year—and it’s backed by data from other major industry surveys. Financing conditions remain exceptionally supportive, while rental growth expectations confirm that fundamentals are likely to be the true driver of performance in the period ahead. For investors, the environment is shifting from defense to selectivity: focus on property type, location, and income durability to capture the next leg of returns.

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Disclosure

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