European Property Investment Rises to €54 Billion

European real estate investment reached €54 billion in the second quarter of 2026, rising 7.7% year on year. First-half transaction volumes totalled €106 billion, up 6.3%. Yet the recovery remains highly uneven: 11 of the 19 European markets tracked recorded lower investment than a year earlier, while growth was concentrated in selected countries and large transactions.

European real estate investment reaches €106 billion in H1

Europe entered the second quarter with improving investment momentum, but the recovery subsequently proved slower than initially expected. The Savills Global Capital Markets Research Q2 2026 – Europe report, published on August 25, says investors have not abandoned the asset class but are concentrating on properties combining secure income, transparent pricing and credible long-term demand.

Final data put second-quarter transactions at €54 billion, compared with the preliminary €53 billion estimate published in July. The year-on-year increase was 7.7%. Investment for the first six months reached €106 billion, up 6.3%. The revision is significant because the earlier estimate had put first-half volume at €103 billion and growth at only 3%.

The stronger aggregate figure does not represent a continent-wide rebound. Eleven of the 19 European markets covered by the final dataset recorded year-on-year declines during the first half.

UK declines as Spain and northern Europe accelerate

The UK made the largest negative contribution to the European result. First-half investment fell 16% year on year to £21 billion, equivalent to about €24 billion, reducing European transaction volume by almost €5 billion.

Several markets moved sharply in the opposite direction. Finland recorded investment growth of around 100%, Poland 93% and Sweden 80%. Spain remained one of Europe’s strongest large markets, with activity increasing 60% to €12.5 billion.

Germany and France each managed growth of only about 3%. Activity in those core markets remained 21% to 36% below their respective five-year averages, compared with a gap of around 7% for Europe overall.

The figures underline how misleading the European aggregate can be. A 6.3% first-half increase combines rapidly expanding markets with a majority of countries where investment is still below last year’s level.

Living assets account for 29% of European investment

Institutional living real estate has become the largest destination for capital. Multifamily rental housing, purpose-built student accommodation, care homes and senior housing accounted for 29% of total European investment during the first half.

Demand is being supported by constrained supply, rental growth prospects and relatively stable income characteristics. Large portfolio disposals in Spain, Finland, France and Poland also contributed to the sector’s share.

Separate data for Europe, the Middle East and Africa reinforce the trend. JLL’s Q2 living investment analysis puts second-quarter volumes at €17.4 billion, 49% higher than a year earlier and the strongest quarterly level since 2022. First-half investment reached €31.2 billion, up 10%.

Multifamily investment alone increased 83% year on year to €14.3 billion in Q2. The number of transactions nevertheless fell 19%, while average deal size rose to €72 million from €39 million. Transactions above €100 million accounted for 68% of total volume.

This means the rise in investment should not be read as an equally broad improvement in liquidity. A substantial share of the increase has come from large portfolios and platform transactions.

Logistics volumes fall while retail investment drops 12%

Industrial and logistics investment weakened during the first half after several years of rapid expansion. European volumes declined by around 7% year on year.

The fall came despite one of the largest transactions of the year, the roughly €2.3 billion acquisition of Proudreed’s French logistics platform. Structural demand from e-commerce and supply-chain reorganisation remains supportive, but investors are applying greater scrutiny to pricing and asset quality.

Retail investment declined 12% year on year after a strong first half in 2025. Major prime assets continued to attract buyers, however. Among the largest transactions were the approximately €1.2 billion sale of an 80% interest in Palazzo del Monte on Via Monte Napoleone in Milan, the €402 million transaction at 29–33 Avenue des Champs-Élysées in Paris, the €331 million sale of Birmingham’s Merry Hill shopping centre and the €329 million sale of Islazul in Madrid.

The transactions demonstrate the widening distinction between prime and secondary property. Buildings with strong occupiers and desirable locations retain access to capital, while properties requiring major refurbishment, energy upgrades or leasing expenditure face a thinner buyer pool.

Cross-border capital accounts for about 45% of investment

Cross-border buyers generated about 45% of European real estate investment in the first half, still subdued by historical standards.

Long-haul investors from the US, Canada and Singapore reduced activity, although US investors remained the largest source of international capital. Within Europe, Dutch and French investors were comparatively active overseas and traded above their respective five-year averages.

Lower cross-border participation makes some markets more reliant on domestic investors. Large transactions nevertheless show that substantial pools of capital remain available for high-quality properties.

ECB rates continue to constrain property valuations

Financing costs remain one of the main constraints on a broader property-market recovery. The European Central Bank kept its deposit facility rate unchanged at 2.25% on July 23, with the main refinancing rate at 2.40% and the marginal lending facility at 2.65%.

Those rates followed a 25-basis-point increase decided on June 11 and effective from June 17, when policymakers responded to stronger inflationary pressures.

Higher borrowing costs have a direct impact on commercial real estate. As financing costs and government bond yields rise, investors generally require a higher return from property, reducing the price they are prepared to pay for a given stream of rental income.

A property yield, or capitalisation rate, expresses the relationship between annual property income and asset value. If investors accept a lower yield while income remains unchanged, valuations rise. Broad-based yield compression of that kind has yet to return across Europe.

Euro-area inflation returns close to 3%

The wider economy is expanding, but inflation offers little support for expectations of a rapid return to cheaper financing. The latest Eurostat Q2 GDP release showed that euro-area gross domestic product increased 0.4% quarter on quarter, while EU GDP grew 0.5%. Compared with the second quarter of 2025, output increased 1.0% and 1.2% respectively.

Euro-area annual inflation rose to 2.9% in July from 2.8% in June, while EU inflation increased to 3.0% from 2.9%, the final July inflation data published on August 19 showed.

Inflation therefore remains above the ECB’s 2% medium-term target. For real estate, the combination is mixed: economic growth supports occupier demand and rental income, but elevated financing costs limit the scope for valuations to rise simply because investors accept lower yields.

Prime property pricing remains comparatively stable

The defining feature of the current cycle is increasingly the quality of individual assets rather than the availability of capital in general.

Prime buildings with secure occupiers, long leases, modern infrastructure and limited competing supply remain attractive. Secondary assets requiring substantial capital expenditure, energy upgrades or reletting face significantly more challenging pricing.

Expectations of widespread yield compression have weakened. The base case for the next 12 months is for prime yields to remain broadly stable, with selective compression largely confined to exceptional assets.

That shifts the source of expected investment returns toward rental growth, active asset management and acquiring mispriced properties rather than relying on a market-wide increase in valuations.

European real estate investment could reach €251 billion

Investment activity is expected to increase further during the second half, but without a sharp acceleration. Some transactions have been delayed rather than cancelled, leaving a pipeline that could support third- and fourth-quarter volumes.

European real estate investment is projected to reach about €251 billion in 2026, an increase of roughly 11% from 2025. The forecast rises to €297 billion for 2027, implying further growth of about 17%.

Even if those forecasts are met, the recovery is unlikely to become uniform. Capital continues to concentrate in markets and properties where investors can identify resilient cash flows, constrained supply and clearly priced risk.

As International Investment experts report, the rise to €54 billion in Q2 and €106 billion in the first half is stronger than the preliminary data suggested, but the structure of the market remains less convincing than the headline growth rate. Most tracked countries did not record year-on-year increases, cross-border participation remains below historical norms and financing costs continue to restrict valuation growth. The current cycle is therefore better described as a selective recovery, led by assets with secure income, limited supply and low future capital expenditure requirements.

FAQ: European real estate investment in 2026

How much was invested in European real estate in Q2 2026?

Transaction volumes reached €54 billion, 7.7% above the second quarter of 2025.

How much was invested during the first half of 2026?

European investment totalled €106 billion in the first six months, an increase of 6.3% year on year.

Why do some reports show a €53 billion Q2 figure?

€53 billion was the preliminary estimate published in July. The final Q2 report released on August 25 revised the figure to €54 billion.

Which European property markets are growing fastest?

First-half investment increased by around 100% in Finland, 93% in Poland and 80% in Sweden. Spain rose 60% to €12.5 billion.

Which property sector is attracting the most capital?

Institutional living assets, including multifamily housing, student accommodation, care homes and senior housing, accounted for 29% of total European investment.

What is happening in European logistics real estate?

Industrial and logistics investment fell by around 7% year on year in the first half. Long-term demand remains, but investors are increasingly selective about pricing and asset quality.

Why do ECB interest rates matter for property?

Higher rates increase financing costs and the minimum returns investors demand from real estate. This can restrict asset-price growth even when rents remain resilient.

What is the European investment forecast for 2026?

European real estate investment is currently forecast at approximately €251 billion for 2026 and €297 billion for 2027.

Has Europe’s property market fully recovered?

No. Aggregate investment is increasing, but 11 of the 19 markets tracked recorded first-half declines. The recovery remains concentrated in selected countries, sectors and high-quality properties.