Southern Europe Leads Real Estate Growth
Southern Europe strengthens its position in the investment cycle
Southern Europe is emerging as the strongest-performing region in Europe’s real estate market in 2026, reinforcing its role as a key destination for global capital. CRE Media Europe, citing Savills, highlights that Mediterranean markets including Spain, Italy, Portugal and Greece are outperforming the broader European landscape.
Investment volumes hit record levels
According to Savills, real estate investment in Southern Europe reached around €35 billion in 2025, marking a record and a 24% year-on-year increase.
This growth outpaced the wider European recovery, with Southern Europe rebounding faster than core markets such as the UK, Germany and France. Investment activity in the region has risen roughly 70% from its 2023 low point.
Stronger economic growth supports demand
Economic performance remains a central driver. GDP growth in 2026 is forecast at around 2.4% for Spain, 2.1% for Portugal and 1.8% for Greece, compared with approximately 1% across the EU27.
This stronger growth supports occupier demand across residential, hospitality and retail sectors, while tourism continues to play a critical role in sustaining market activity.
Residential, hospitality and alternatives drive expansion
Southern Europe’s investment landscape is becoming more diversified. In addition to offices and retail, alternative sectors such as student housing, senior living, healthcare and hotels are expanding rapidly.
Hotels remain a major driver of investment volumes, particularly in Spain and Greece, while Italy and Portugal are seeing growing activity in residential and logistics segments.
Cross-border capital increases exposure
Investor behaviour is shifting, with international capital reallocating toward Southern Europe as growth slows in core markets.
This has increased liquidity and expanded the investable universe, transforming the region from a peripheral allocation into a strategic component of European real estate portfolios.
Yield advantage and energy resilience support appeal
Higher yields compared with core European markets continue to attract investors. Additionally, stronger renewable energy adoption in Southern Europe reduces exposure to energy volatility and improves cost predictability for occupiers.
These factors enhance the attractiveness of office, logistics and industrial assets.
Growth to continue but at a more moderate pace
Despite strong fundamentals, growth is expected to become more uneven as the broader European cycle normalises. Savills indicates that future performance will depend more on specific markets and asset classes rather than the region as a whole.
The market is transitioning from a rebound phase to a more selective investment environment focused on asset quality and income resilience.
As experts at International Investment report, Southern Europe is no longer a secondary allocation in European real estate portfolios. It has become a core growth engine, although capital will increasingly concentrate in sectors with stable demand such as housing, tourism and alternative assets.