Resource overview
Emerging Trends in Real Estate: Europe 2025 is a pan-European market report published by the Urban Land Institute (ULI). It draws on a survey of 1,143 property professionals and additional interviews to assess real estate conditions, capital markets, city and sector prospects, and the implications of sustainability, climate risk, and decarbonisation for investment and development.
Market mood and macro context
European real estate leaders report cautious optimism as interest rate conditions become more benign than in previous years, while fragile economic growth and heightened geopolitical uncertainty continue to weigh on sentiment. Conflicts in Ukraine and the Middle East, as well as election-related uncertainty, are repeatedly cited as key sources of volatility. The report notes that weak tenant demand remains a concern for 44% of respondents, with some leaders favouring a three-to-five-year recovery horizon rather than making strong bets for 2025.
Key risks and constraints highlighted in the survey
The survey ranks economic/financial issues (85% concerned), real estate/development issues (83%), and social/political issues (77%) among the leading categories of concern. Regulation and construction constraints remain prominent, alongside the availability and cost of finance. The report also highlights a growing focus on asset obsolescence, and emphasises that liquidity and price discovery remain challenged in sectors still adjusting to structural change.
Housing and “living” sectors in focus
Across the “sectors to watch” rankings, multiple housing-related segments remain strongly positioned. The report links continued investor interest in living sectors to persistent demand–supply imbalances in European cities, including shortages of affordable housing. Student housing is identified as a leading residential sub-sector, with the report noting its inflation-hedging characteristics and the expansion of cross-border study and English-taught programmes in parts of the EU. At the same time, the report flags tensions between affordability objectives, rent regulation, and the cost of meeting higher sustainability and quality standards.
Sustainability, decarbonisation, and climate-risk financing
Environmental sustainability and decarbonisation remain central themes. The report states that 88% of respondents express concern about environmental, sustainability, and decarbonisation issues, and that nearly 90% expect capex and financing requirements for the transition to net zero to be a key factor in real estate financing over the next five years. It also reports expectations of rising insurance costs: nearly two-thirds anticipate higher insurance costs over five years, and more than half expect access to insurance to become harder. The report highlights that owners without a net-zero pathway may struggle to obtain finance, reflecting increased scrutiny by insurers and lenders.
City prospects and investment preferences
Market size and liquidity strongly influence city preferences. In the “cities to watch” ranking, London is first, Madrid second, and Paris third for 2025, with commentary that Madrid’s rise is linked to perceived quality-of-life advantages and “big-city” benefits. The report suggests that economic uncertainty may reward more hands-on investment and operational approaches, alongside a continued shift toward alternative and operational real estate.
Capital markets: volumes, pricing, and the cost of finance
The report describes European investment volumes as subdued, noting MSCI data that volumes fell to a 10-year low of €182 billion in 2023. It emphasises wide bid–ask spreads in offices and retail, but notes that logistics, storage, and various forms of housing have been comparatively resilient. Respondents’ concerns about inflation and interest rate movements are described as easing relative to prior surveys, but the report stresses that the recovery in sentiment is fragile and exposed to renewed geopolitical shocks.