Investment Activity in Real Estate: Trends for 2025

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In 2025, the European real estate market is showing signs of recovery after a period of high uncertainty caused by rising interest rates and economic fluctuations. Amid a changing investment climate, activity among major funds and landlords is increasing, shaping new trends in the office, retail, and residential real estate segments.

Norwegian Fund Invests in Prime London Real Estate

One of the key developments has been the acquisition by Norway’s sovereign wealth fund, Norges Bank Investment Management, of a 25% stake in a prime real estate portfolio in London’s Mayfair district, Bloomberg reports. The deal, worth £306 million ($378 million), was completed in partnership with Grosvenor, a major property company. The portfolio, valued at £1.2 billion, consists of 175 assets, primarily office and retail properties located on Grosvenor Street and Mount Street.

According to a statement, by the end of last year, the occupancy rate of Grosvenor’s London estate reached 97%, while the average rent for new apartments was 14% higher than estimated.
"We are confident in the long-term value growth of real estate in the West End," emphasized Jayesh Patel, head of UK real estate at Norges Bank Investment Management.

Luxury real estate, including high-end retail, has helped mitigate the impact of the market correction caused by interest rate hikes. Investors see this as a unique opportunity to acquire some of Europe's most prestigious locations at historically low prices or benefit from rental yields, which are expected to increase significantly.

Norway’s sovereign wealth fund already owns a stake in Regent Street, in partnership with the Crown Estate, an area known for its flagship retail stores. Last year, it also fully acquired the Meadowhall shopping center in Sheffield.

For centuries, aristocratic estates have played a crucial role in London's development. Large portions of land in the city's wealthiest districts remain owned by a few families, including the Grosvenor estate in Mayfair and Howard de Walden in Marylebone.

"Attracting investment on this scale will enhance the West End’s competitiveness and appeal as a global economic, cultural, and commercial hub," said James Raynor, CEO of Grosvenor Property UK.

Bond Market Recovery in the Real Estate Sector

Following a period of funding shortages in 2023, Scandinavian real estate companies are actively returning to the debt markets. In 2024, they raised €14.6 billion in new debt instruments, a 250% increase from 2023. However, this figure remains significantly below the record €28 billion in 2021.

Major landlords such as Heimstaden Bostad AB and Castellum AB are re-entering the bond markets. For instance, Heimstaden issued €1 billion in bonds for the first time in years to reduce reliance on bank financing. However, the sector remains vulnerable: Standard & Poor’s has classified some of Heimstaden’s bonds as issued under default conditions, reflecting instability in credit ratings within this segment.

Nevertheless, analysts anticipate further market expansion, especially in international markets. According to the CFO of Fastighets AB Balder, the company plans to issue eurobonds in 2025 as part of its financing strategy. Borrowing costs are expected to decline in the coming quarters, providing additional incentives for re-entering the market.

European Market Trends

According to Colliers, investors in 2025 are reassessing their strategies in the office real estate sector, modernizing properties and exploring alternative locations. The retail sector is rebounding, driven by revised rental valuations and the adaptation of shopping centers to new formats. The hospitality industry is one of the most attractive investment sectors, with high occupancy rates expected to grow alongside profitability.

A Savills report predicts a 15% increase in real estate investments across Europe in 2025, compared to 2024. The key drivers of this growth are the stabilization of interest rates and the recovery of economic activity. The most attractive segments are logistics real estate and rental housing, which have shown strong resilience to market fluctuations. However, the office sector faces challenges due to changing work models and declining demand for traditional office spaces.

Savills experts highlight Germany, France, and the UK as particularly promising markets, with increased transaction activity due to greater financing availability. Investors are showing a heightened interest in premium assets, particularly in multifamily residential properties and the hospitality industry