Emerging Trends in Real Estate: Europe 2025

This report, published by ULI (Urban Land Institute) and PwC, explores the evolving landscape of the European real estate market in light of current economic and geopolitical factors. It highlights the impact of interest rates, geopolitical uncertainty, and climate change on real estate investments and development strategies.

European real estate leaders are experiencing cautious optimism due to a more stable interest rate environment compared to previous years. However, economic growth remains fragile, and geopolitical events—especially conflicts in Ukraine and the Middle East—have heightened uncertainty. A survey of 1,143 property professionals indicated that while confidence and profit expectations for 2025 have improved, concerns about tenant demand persist, particularly in Germany.

Despite a subdued investment climate, sectors such as logistics, storage, and various forms of housing are expected to perform relatively well. Investors are increasingly wary of inflated prices driven by over-optimistic growth assumptions. The report emphasizes that major cities like London, Paris, and Madrid are viewed favorably due to their size and liquidity, with Madrid rising significantly in ranking due to its improved quality of life.

Environmental, Social, and Governance (ESG) issues are becoming central to real estate investment strategies. Nearly 90% of survey respondents expect capital expenditure (capex) and financing for the transition to net-zero emissions to be crucial in the next five years. There is a strong belief that current asset valuations do not accurately reflect the challenges posed by climate change, shifting occupier demands, and social impacts.

The report discusses the increasing costs associated with climate-related risks and the implications for property insurance. There is a growing awareness that physical climate risks are becoming a critical factor in determining the viability of real estate investments. Nearly two-thirds of respondents anticipate an increase in insurance costs over the next five years due to rising claims from extreme weather events.

Key sectors identified for future investment include data centers, new energy infrastructure, and student housing, which continues to attract institutional interest. The demand for purpose-built student accommodation is noted as counter-cyclical, offering higher returns during economic downturns. The report highlights the importance of operational real estate, emphasizing the need for integrated strategies that incorporate both asset management and business operations.

The report underscores the necessity for greater collaboration among real estate stakeholders, including investors, insurers, and policymakers, to navigate the complexities of the market. As Europe aims for a sustainable future, the integration of ESG principles and the development of resilient infrastructure are essential for long-term success in the real estate sector.