Commercial real estate in Europe - statistics & facts
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Since the COVID-19 pandemic, the European commercial real estate sector has faced rising pressures, including sluggish economic growth, high construction costs, and declining property values. These challenges were evident through the dramatic decline in investment volumes in 2023 and the suppressed levels through 2024. The shifting economic landscape has impacted all commercial real estate subsectors. Still, offices have been hit the hardest, with the share of commercial real estate investment allocated to offices falling by 21 percentage points between 2019 and 2024. Conversely, industrial real estate has emerged as the most sought-after property type among occupiers and investors.
Another accelerating trend is the growing penetration of e-commerce among European consumers. The pressure on retailers to provide a fast and seamless shopping experience has increased the significance of modern and efficient warehouses and fulfillment centers. This has not only posed a challenge to traditional brick-and-mortar retailers but also intensified the demand for prime warehouses and distribution centers. Additionally, in a world with rising trade tensions and supply risks, a robust network of logistics facilities offers an opportunity to enhance the resilience of supply chains.
Despite a challenging economic environment, the European commercial real estate sector is forecast to grow in the next five years. This projection is based on a soft-landing scenario, where inflation is contained, central banks cut interest rates, and economic growth resumes, avoiding recession.
Recent trends in the European commercial real estate market
Hybrid work has had an immense effect on offices, a traditionally steady asset class for investors. The shift toward flexible work arrangements has curbed demand for office space and led to repricing in the sector. In October 2024, the Green Street pan-European commercial property price index (CPPI) registered a decline of nearly nine percent in office values. With leasing activity slowing, the vacancy rate for prime properties in many of Europe’s major real estate markets have slightly increased. Despite this trend, many many of Europe’s major cities recorded vacancy rates for prime offices below eight percent.Another accelerating trend is the growing penetration of e-commerce among European consumers. The pressure on retailers to provide a fast and seamless shopping experience has increased the significance of modern and efficient warehouses and fulfillment centers. This has not only posed a challenge to traditional brick-and-mortar retailers but also intensified the demand for prime warehouses and distribution centers. Additionally, in a world with rising trade tensions and supply risks, a robust network of logistics facilities offers an opportunity to enhance the resilience of supply chains.
Biggest challenges ahead
Some of the issues that caused the most concern among industry experts in 2025 were increased regulation, construction costs, and resource availability. Construction material prices soared in 2021 and 2022 due to inflation and supply chain pressures, with prices for materials such as concrete and cement witnessing further double-digit growth in 2023. That has led to escalating construction costs, pressure on the sector, and rising insolvencies.Despite a challenging economic environment, the European commercial real estate sector is forecast to grow in the next five years. This projection is based on a soft-landing scenario, where inflation is contained, central banks cut interest rates, and economic growth resumes, avoiding recession.
