Surging European real estate sentiment into 2026

Market response: Real estate

December 4, 2025 | 2 min read

Rich Hill

Global Head of Real Estate Research & Strategy

On December 3, 2025, INREV released its 4Q25 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.

The headline indicator rose for the second consecutive quarter and now stands at 59.4, the highest reading since the tracking began in March 2023. All five subindicators improved quarter-over-quarter, and four of five now surpass a reading of 50 for the first time since September 2024.

Financing remained the leading sub-indicator at 70.1, the highest reading recorded across any sub-indicator since the series began.
Investment liquidity increased by 5.2 points to 61.4, amid respondents’ widespread intention to invest more in European real estate in 2026.
Leasing & operations edged up 1.2 points to 59.3, reflecting expectations of rising net effective rents for new leases.
Economy rebounded to 53.8, its first reading above 50 in more than one year.
New development improved marginally to 49.4 but remains just below expansionary territory.

A global trend

Notably, the European data aligns with sentiment in the U.S. The Real Estate Roundtable’s Sentiment Index held steady at 67 in 4Q25. The Current Index inched up 1 bp to 64, while the Future Index slipped 2 bps to 69, signaling that sentiment has largely stabilized and is shifting toward guarded optimism. Additionally, 63% of respondents say overall market conditions are better than a year ago, and 70% expect further improvement over the next year. Many respondents foresee stronger transaction activity in 2026 as interest rates ease and confidence returns, though they also note that political and policy uncertainty continues to cap near-term enthusiasm.

Likewise, the CRE Finance Council (CREFC), the industry association representing the $6.2 trillion commercial and multifamily real estate finance market in the U.S., reported a 9% rise in its Sentiment Index to nearly 123. This is the highest level since 4Q24 and a clear reinforcement of the sector’s recovery momentum. Optimism is increasingly broad-based: 95% of respondents expect stronger borrower demand over the next 12 months, and 86% anticipate increased investor demand for CRE and multifamily assets, up sharply from 65% last quarter.

Bottom line

We believe rising sentiment globally reflects that the CRE cycle has moved into recovery by nearly all traditional measures. REIT valuations, often a bellwether for cyclical turning points, have risen broadly since their 2023 trough. Valuations across most major indices have stabilized, and credit markets are functioning again, helping bolster transaction activity. At the same time, distress(a classic lagging indicator) continues to edge higher, reflecting the long tail of the downturn. Beneath the surface, however, returns are diverging sharply across property types, geographies, and funds. Europe shows single-sector funds outperforming multisector peers, and in the U.S. most property types are seeing top-quartile markets up more than 10% from their troughs. This unevenness isn’t a bug of the recovery—it’s the defining feature. With beta no longer doing the heavy lifting, alpha will likely come from selecting the right assets in the right places at the right time.

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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