How the year is shaping up differently for real estate in the UK, US, France and Germany

September, traditionally the month when the real estate industry gets down to some serious work after the summer break, has been and gone. As Expo Real, the key international real estate conference, gets under way Monday in Munich, here's a comparison of the performance of four of the largest commercial property markets, the United Kingdom, United States, France and Germany, and a review of the major themes of 2025 for each.

CoStar's global news team will be covering the Expo Real conference in full.

A number of large investment and leasing transactions in all the main asset classes, notably hotels and offices, in September suggests United Kingdom commercial property should have a pleasingly strong end to 2025 in terms of deals. At the same time, confidence remains fragile and more activity cannot come soon enough.

A stuttering United Kingdom economy and an increasingly under-fire government remain a drag on transactions, as well as the curious decision to delay the Budget, the United Kingdom's key financial announcement for the year, until late November.

In the second quarter, brokerage Colliers reports United Kingdom commercial real estate investment volumes reached £12 billion, 15% below the five-year quarterly average, but an improvement on the first quarter’s £10.3 billion. Industrial assets led the way, accounting for 24% of total investment, followed by offices at 22%, retail at 18% and residential, including student accommodation at 16%. Looking ahead, Colliers continues to expect a slow, unspectacular recovery.

But it is not hard to find signs of increasingly positive activity in the third quarter.

The hotels sector has been a standout, with Savills now suggesting United Kingdom investment hit £1.04 billion in the third quarter, a 28% year-on-year increase. The lift has been driven by single-asset transactions, which accounted for 92% of activity and rose almost 60% above the 10-year third-quarter average, even as overall investment volumes remained 5% below long-term trends.

Bigger London office sales are also increasingly back. The litmus test is no doubt Nuveen's disposal of the "Can of Ham" building at 70 St Mary Axe. Earlier this year, talks to sell the building to Blackstone for more than £300 million ended, with Nuveen presumably deciding it could get a better price with a bit of patience.

The building is now under offer to Capreon, the investment company of the Noé family, and alternative investment manager Hayfin Capital Management for around £340 million, representing a yield of about 5.6%. That would be the largest price achieved for a London office building in three years.

Great Portland Estates has gone under offer for one of the West End's largest individual office sales, One Newman Street in Fitzrovia, to Royal London Asset Management for around £250 million or a sub 4.5% net initial yield. Hines is closing on a sale of The Burlian, its retail and office development straddling Oxford Street and Bond Street for close to £200 million or a 3.75% net initial yield, while Landsec has exchanged contracts to sell its Queen Anne's Gate, SW1, office block to Arora Group for £245 million, for a luxury hotel makeover.

The disposals point to a clear recovery in investor sentiment. It is an important bellwether for other European real estate markets because, as Savills' head of EMEA commercial research Mat Oakley points out, a recovery in City and West End offices typically means recovery across other key centres in Western Europe.

Michael Kovacs, Castleforge founding partner, is bullish that recovery is underway in London offices: "Occupier demand has been strong for the past five years in London but curiously, investors had remained on the sidelines. It’s almost like when Blackstone shouted 'Go!' in the first quarter by buying office buildings in central Tokyo and Midtown Manhattan and was rebuffed in the City of London, other investors" came to the conclusion they were also allowed to invest in offices.

He added that "whether it was causation or mere correlation, it was the biggest shift in investor sentiment I’ve seen in 20 years in the London market, and made for a very busy rest of the year. I think when we look back, we’ll remember the summer of 2025 as the moment a switch flipped and the market came back to life."

Stanhope head of leasing Kevin Darvishi is positive but more cautious, pointing out the London office development market continues to be hampered by high construction and fit-out costs, but he said the situation has improved significantly.

"The reality is that occupiers are prepared to pay prime rents to upgrade and move into best in class accommodation. There continues to be a slowdown in what I would term the Grade A-minus market, with some of these buildings slightly stuck, but those buildings in the best locations, with the right quality refurbishment and the right floorplates, continue to attract occupiers. That’s not to say you can apply a cookie cutter approach to development. It’s about identifying the unique selling point of a particular asset and amplifying it through the design process. Take the South Bank, it's all about being on the River," he said.

In terms of how this translates to capital markets, Joe Binns, head of investment at Stanhope, points out that new supply of best-in-class office space is down, and there is very little coming through over the next three to four years. In response, occupiers are looking at their options much earlier than they would have done, in some cases for lease expiries as far away as 2035.

He said that "on the other hand, it’s been a difficult investment market for buyers and sellers alike. The negative rhetoric around offices has made it difficult to persuade global capital to enter the market, and at the same time there has been very little distress, so we haven’t seen the price correction that would encourage more buyers. But it looks like prices have definitely bottomed out, which is giving more confidence to both vendors and buyers. We have a high conviction in the opportunity today to buy and deliver the right product in to the market."

James Emans, joint head of United Kingdom investment at Savills, describes 2025 so far as an "extraordinary year" for real estate in the United Kingdom: "There was a lot of momentum at the outset of the year. But you only have to look at volumes up to [the first half] to see that the additional political risk that came wiped a lot of that out. But we are also getting back to a place where that positivity is reinivigorating itself. "

He added that "the reason, in part, is investors were downbeat on offices because a large number of counter cyclical investors" are United States private equity firms and sentiment there was poor for offices. He added that now there is much more positivity about take up in a lot more of the major United States cities. A lot of the United States "private equity houses are coming to talk to us about data and price points now," he said.

The shopping centre market is also set for a number of major transactions in the coming weeks with four major processes under way. They are Braehead near Glasgow, Merry Hill in the West Midlands, Silverburn in Glasgow and the Lexicon in Bracknell.

James Stevens, head of investment – global real estate, Aviva Investors, agrees that a number of factors suggest a market pick-up has arrived in the United Kingdom and Europe. He said the vital ingredient is not to repeat domestic market biases in other countries.

“That’s how we have the right conversation with the right capital, even in places we are not based. We’re speaking with a lot more capital from different parts of the world who have decided where they want to invest and now it is about timing," he said.

He added that the United States tariff position prompted a lot of people to re-evaluate some of their investment decisions, but in the last six to nine months, we’ve seen a general sense that structurally there should be more allocation to Europe. Another critical factor is that there has been a tipping point recently, with equity offering better value relative to debt. So the question is, how do we enter into a market where we want to be more equity focused than debt?"

Stevens also said that on the structural side of real estate, on average, United Kingdom pension funds have less than 2% exposure to residential, far below other global institutions in other regions. A lot of global investment appetite is also biased towards residential compared to Europe and the United Kingdom, so his firm concludes there are underrealized opportunities.

In the United Kingdom in the final quarter of the year, Stevens does not expect a huge amount of investment in commercial real estate. “Six months ago I would have thought there would be more, but the market still has depth. In London, we’ve seen strong demand for super-prime West End offices, while there is less demand for more medium-term income. In logistics and retail warehousing, we don’t think there’s much quality stock at good prices presently.”

Blackstone's head of real estate acquisitions, Europe, Samir Amichi, unsurprisingly sees little reason to slow down at present in any jurisdiction. The United Kingdom has been its preferred location, and that does not look like changing any time soon.

"We are long-term investors in Europe, committed to deploying capital through cycles, as evidenced by our activity over the past three years. Western Europe in particular remains attractive to global capital," he said. He adds that the United Kingdom has been the firm's most active European market over the past 24 months, and the firm has recently announced its intention to invest up to £100 billion in United Kingdom assets over the next decade. France, as the European Union’s second-largest economy, "combines a vibrant entrepreneurial ecosystem and enduring foreign investor appeal while Germany, a core market for us for over 20 years, is showing early signs of renewed optimism and deal momentum," he said.

"Across Europe," he added, "we are both selling selectively and acquiring where we see compelling opportunities, reflecting our confidence in the region’s long-term fundamentals. With liquid debt markets improving, rates easing, and investor appetite returning for larger transactions, we believe this could be a highly attractive vintage for real estate investing.”

In terms of crossborder investment, Aviva's James Stevens adds: “There’s always something to get your head around." In the United Kingdom, "it’s recently been the proposed ban on upward-only rent reviews, but people are well-versed in reviewing these changes. It does create inertia though. You will wait to see how it plays out. It adds time to decisions and reduces volume," he said.

"There are aspects of Germany and France we like, including logistics in France and student housing in Germany, as both are undersupplied. Does the political situation have a bearing if you’re investing for the medium to long-term? Ultimately for us, we can still execute. It is a harder decision if you are out of the real estate market and coming back in."

Allen Chilten, head of real estate capital raising at Schroders Capital, said investors are still mostly waiting for capital to be returned to them before they can invest in more sector-specific plays.

It would be good for the United Kingdom "to have better macroeconomic growth but we see opportunities to invest in operational real estate," notably the firm's recent United Kingdom self-storage platform launch. In the UK all investments need to stack up for investors globally and some markets are more challenging than others, he said.. "Generally different sectors and countries have repriced at different paces across Europe," he added.

"As a general theme, most investors are still looking at logistics and industrial and hospitality and living. There is more interest around the edges in asset selection for offices but it is not a blanket approach but tailored to certain locations and assets. Hospitality and living are very much buys. Even though these are popular sectors, a number of investors are still underweight, especially as the sectors diversify in a number of adjacencies such as landlocked countries and locations," he said.

In terms of Schroders' picks, Chilten said: "We like the Netherlands where we have existing assets and where it is hard to develop new assets. That translates to other markets," the Nordics and parts of the United Kingdom. "We certainly don't ignore wider global changes. It is more of a stock pickers' market at the moment and having teams on the ground is a huge advantage. We are very much focused on thematic trends. Across our vehicles we can share insights and data and being a large institution we have the listed side of the business. We have been able to take our experience of our hospitality platform and that buzzword of hotelisation of assets. That experience we try to share across the platform and use in other sectors. There is a very interesting play for operational asset owners as they need the governance expertise of a platform like that of Schroders."

Emans said that investment sentiment for anything non-thematic remains patchy and most investors are still targeting living and industrial.

"In offices, there are very few thematic buyers but we think that is about to change. We have a strong market share of regional offices and in 2026 we are expecting a lot of repeat buyers. In 2024, of the roughly 200 regional office transactions there were only 15 repeat buyers."

He added that "if you track every one of our sales this year in 25 we have 300 different investor houses entering our data rooms. It is wonderfully disparate. Next year will be a year for private equity and opportunistic funds as that is where the biggest weight of capital is. In offices there is a lot of momentum in occupation. Reading is about to have one of its biggest years in a long time with up to 600,000 square feet of take-up. The investment market is going to wake up to this. In addition the office market has been rightsizing since [permitted development] rules came in and swathes of secondary stock is coming out of the market."

In this context Emans said the only bad news will be "we are still expecting offices to be the highest turnover of all the sectors in 2025 but we are going to need a big fourth quarter to see volumes return to long-term averages".

After years of sitting on the capital market sidelines, the United States' rebounding office market has meant larger institutional players have gradually returned to dealmaking mode.

While private capital and owner-users continue to dominate the investment landscape, heavyweights such as Norges Bank Investment Management, BXP, Tishman Speyer and Beacon Capital Partners have in recent months closed high-profile deals that have indicated the national market has finally turned a post-pandemic corner.

Investment volume in the United States so far this year has climbed by about 25% compared with the same period in 2024, according to CoStar data, with buyers collectively spending more than $36 billion. What's more, pricing is on an upward swing, especially as interest in premium properties in top-tier markets has quickly rebounded.

While there are still plenty of distressed properties trading at discounted valuations, the outlook for the United States office market is becoming increasingly brighter as some of the nation's largest employers rachet up their attendance mandates and companies throughout the tech industry have bolstered demand in cities including San Francisco, New York, and Seattle.

Some notable deals that have closed since the beginning of the year include Tishman Speyer's more than $105 million purchase of a Manhattan office building, its first in the city since the onset of the pandemic more than half a decade ago. Kilroy Realty last month scooped up an office campus in Los Angeles' posh Beverly Hills. And Vornado Realty Trust recently purchased the office space above New York City's iconic Saks Fifth Avenue department store in a deal that will retain its original use rather than pursue earlier plans to convert it to residential purposes.

Most office markets in the United States "are still in the early stages of a valuation reset," Marion Jones, a principal and managing director of United States capital markets at Avison Young, told CoStar News. Yet demand has become more stable, "with rising rents in competitive locations. As interest rates continue to improve, some of the gridlock is expected to ease, enabling owners to offload legacy assets, an essential step before deploying fresh capital. This shift should pave the way for increased institutional activity on both the buy and sell sides in 2026." 

And activity over the next few months is expected to provide a more accurate gauge of investor confidence. Barring any unexpected twists, a confluence of factors such as a peaking vacancy rate and ongoing leasing momentum will likely bolster sales activity as buyers aim to plant a stake in the market's recovery. 

The office market is headed toward pre-pandemic levels of stability, a point at which the United States retail, industrial and multifamily markets have already reached. 

Even so, a turbulent political landscape and a wobbly economic outlook has meant investors across the United States capital markets are keeping a close eye out for any possible warning signs, no matter how confident they may feel in meaningful property sector improvements. 

That uncertainty is playing out around the world, however, and the United States appears to be weathering it stronger than some of its overseas counterparts. 

"While continental Europe has seen a pullback in institutional office investment, North America is leading globally in fundraising," Jones said. "Evolving monetary policy will likely be a key catalyst for change in 2026." 

Ahead of Expo Real, the mood on the German property market still appears subdued. In its survey of registered visitors, those running the event conclude that optimists make up the relative majority at 44%, while 35% assess the situation as "neutral" and "cautious" was at only 22%.

However, the latest quarterly survey by the industry’s umbrella group ZIA shows that hopes have faded again after they had risen following the new federal government taking office in May, particularly for project developers and the office segment.

Maximilian Leyser, head of business development at Munich-based investment manager Manova Partners, speaks of "a certain disillusionment“ that "despite inflation being brought under control and new government debt, the mood in the economy is more one of hangover" than optimism. The fact that initial yields have become more stable over the past few quarters is "giving investors increasing confidence to become more active. On the other hand, the German market is still quite expensive compared with the rest of Europe, which, combined with the weakening economy, is not an ideal combination."

The fact remains that the local investment market has not yet gained momentum. According to the latest figures from Savills, the transaction volume for commercial and residential properties in the first nine months amounted to €21.6 billion, which is 9% below the previous year's figure and 54% below the 100-year average.

Sales are below last year's level in all asset classes except healthcare properties. Nevertheless, Savills, like the German Property Partner broker network, believes that the fourth quarter will be stronger thanks to upcoming major deals. But "the recovery is fragile and, given the unstable conditions, a sustainable turnaround has not yet been achieved," said Karsten Nemecek, deputy chief executive Germany at Savills.

Fabio Carrozza, managing director at BF.real estate finance, sees the biggest obstacle as being the continuing divergence between the price expectations of buyers who want to acquire at current market conditions and sellers who bought and financed at the conditions that prevailed before the interest rate turnaround in 2022.

Ulrich Höller, head of project developer and investment manager ABG Real Estate, uses a "still challenging" label for pricing. Many international investors have considerable funds at their disposal but are still waiting on the sidelines.

English-language players in particular are demanding higher returns and waiting for alternative entry opportunities. "As soon as a signal of confidence breaks the deadlock, they will enter the market with determination and start a wave of investment" that he said will rejuvenate the market. Large German institutional investors are also holding back on new business: insurers and pension funds are consolidating their portfolios, reducing vacancies and securing financing. This is slowing down the market recovery.

"What the investment market in Germany needs now is predictability," said Piotr Bienkowski, managing director of real estate consultancy PXTRE, referring to conditions such as targeted housing subsidies, bureaucracy reduction and the expansion of critical infrastructure such as electricity capacity for data hubs.

A return to in-person attendance in the office would also provide positive impetus for the hearts of cities and for consumption.

Dominik Brambring, managing partner at Berlin-based investor Periskop Opportunities, emphasizes that, in addition to planning security, stable interest rates, reliable regulation and functioning financing, there is also a need for the courage to institutionally establish promising segments and scale them broadly.

"The fact that institutional and, above all, international money no longer finds its way into German real estate on its own must be reflected in business models and price expectations."

Christine Bernhofer, CEO of the fund company Real IS, already sees positive developments in the political environment, for example the proposed Location Promotion Act and the proposed Act on the Limitation of Risks through Fund Investments, but also the emerging recent turnaround in the number of building permits.

Michael Fink, managing director at Catella Investment Management, believes that the market is already significantly more active than it was one or two years ago. In this respect, he expects more business to be done at Expo Real and transactions to pick up. He points out that office transactions in the core segment are taking place again in Paris and London in central business district locations: "This raises hopes for a boost in the office market."

The general consensus in France was that the investment market was showing signs of improvement at the end of the Mipim real estate conference in Cannes in March, and until September.

This was shown by the numerous transactions valued at over €100 million signed in the spring and summer, especially Union Investment's sale of the Paris Trocadéro business centre to Blackstone for over €700 million. Completed at the end of the summer following a tender process in which 12 investors submitted bids bigger than €650 million, including France's AXA IM Alts, Germany's Commerz Real, Norway's Norges Bank Investment, Italy's Generali Real Estate and the Hines of the United States, the transaction indicated a return of liquidity to the market.

Although it was the most spectacular, it was far from being the only massive deal signed in France in 2025. These included Gecina's acquisition of the Solstys building for €435 million, CMA-CGM's acquisition of Quadrans Est at €290 million, and Immobilière Dassault's acquisition of 88 Rivoli (€100 million). Other similar deals are well on their way, such as the sale of 10 Hoche to Deka Immobilien for €115 million and 91 Champs-Élysées to Foncière Renaissance and Mimco (€320 million).

However, the gloomy political and economic climate has largely damped this wave of optimism, according to numerous market players in recent weeks.

"After a period of optimism in June and July, I would say that the start of September was perhaps a little more turbulent," said Cevan Torossian, associate director of Research at Arthur Loyd France, on Business Immo's BiTV programme last week.

A few days earlier, Raphaël Amouretti, CEO of Catella Property, made a similar statement: "Before the summer, we saw a willingness to act, with a much better conversion rate. And then there was the vote of confidence, the downgrading of France's sovereign rating by Fitch [from AA- to A+], public debt exceeding 115% of GDP... All of this ended up jamming a machine that didn't need it. "

Recalling that "the OAT [French 10-year government bond yields] is a marker of the attractiveness of the real estate asset class" and that "a landing around 3%" was expected by the market initially, Emmanuel Massy, managing director of Arthur Loyd France, observes that the current level, around 3.5%, "has led to marketing delays this autumn, with investors waiting for more visibility on the OAT landing."

This does not mean that the market is completely at a standstill; in fact, several major transactions are still in the pipeline. The most significant of these is Blackstone's agreement to acquire the French logistics platform Proudreed for €2.3 billion. Others could also boost volumes, starting with 47 Austerlitz, for which Aermont reportedly signed a purchase agreement at the end of September for slightly below €300 million.

"But these investors are extremely selective, so we have a somewhat misleading market with more volume, but not necessarily more transactions," warns Alexandre Wodka, head of capital markets at Savills France. He added: "There is no longer much of a yield compression in Paris on core prime profiles, with yields stabilising around 4%. On the other hand, in the inner suburbs [...], we are seeing very high yields on good buildings, even very good buildings." 

The most striking example is undoubtedly the Magnetik building, on the border between Paris and the southern suburb of Montrouge. Sold by LaSalle IM and JPMorgan Asset Management, the 34,000-square-meter complex, despite being occupied by solid tenants such as Chronopost and Deskea, was acquired by Signl Capital for €140 million, reflecting a yield of between 12% and 13%. The asset was reportedly put on the market in 2020 for €300 million, according to CoStar News.

However, "there is a certain amount of nervousness" among real estate investors, according to Torossian, several interviewed by Business Immo, both domestic and international, do not plan to turn away from France despite its more tense political and economic context.

"Paris will always remain by far the largest city in the EU," said Mike Bessell, managing director and European and global investment strategist at Invesco Real Estate, speaking to BiTV, adding that "no property investor can ignore that" fact. In the same vein, Martin Towns, global head of real estate at M&G, acknowledged that "the current political situation could prompt players to pause and be slightly cautious in deploying new capital," but nevertheless believed that "there are still interesting and compelling trends" in the French market. 

In this contrasting context, Arthur Loyd France is forecasting higher performance for real estate investment in 2025 than last year, although still far from the peaks recorded in 2019 or 2021, when volumes approached or exceeded €25 billion. "Despite the volatility of the environment, we estimate that all asset classes combined will land at between €14 billion and €16 billion, a slight increase of around 15% compared to 2024," said Emmanuel Massy. For offices, we are projecting a volume of between €6 billion and €8 billion, whereas 2024 was a low point with €5.5 billion."

The article was produced by Paul Norman, CoStar News UK; Katie Burke, CoStar News US; Richard Meier, Thomas Daily, CoStar's German news operation; and Luc-Etienne Rouillard Lafond, Business Immo, CoStar's French news operation.