Major commercial real estate markets, including the United Kingdom, United States, Germany, and France, are navigating a complex and uneven recovery. As industry leaders convene for the Expo Real conference in Munich, analysis reveals varying degrees of investor confidence and transaction volumes, with cautious optimism emerging in specific sectors despite lingering economic and political uncertainties.
Key Takeaways
- United Kingdom: The London office market is showing a significant rebound with landmark sales, signaling renewed investor confidence that could influence wider European markets.
- United States: Investment volume has climbed approximately 25% year-over-year, driven by a recovering office sector as major employers enforce return-to-office mandates.
- Germany: The market remains subdued, with transaction volumes significantly below the 10-year average. Investors are cautious due to high prices and a weakening economy.
- France: After a strong summer with several large deals, political and economic concerns have dampened optimism, though major transactions are still proceeding selectively.
United Kingdom Market Gains Momentum
The UK's commercial property market is showing promising signs of a strong finish to 2025, particularly in London. A series of high-profile transactions in the office and hotel sectors suggests that investor sentiment is on the rise, even as the broader economy faces challenges.
In the second quarter, UK commercial real estate investment reached £12 billion, according to Colliers. While this figure is 15% below the five-year quarterly average, it marked an improvement over the first quarter's £10.3 billion. Industrial assets were the most popular, accounting for 24% of the total investment.
London's Office Sector Leads the Charge
The London office market is experiencing a significant revival. One key deal is the pending sale of the "Can of Ham" building at 70 St Mary Axe to Capreon and Hayfin Capital Management for approximately £340 million. This would be the highest price for a London office building in three years.
Other major sales include Great Portland Estates' One Newman Street, under offer to Royal London Asset Management for around £250 million, and Landsec's sale of Queen Anne's Gate for £245 million for a hotel conversion. These transactions point to a clear recovery in investor confidence.
A Bellwether for Europe
Mat Oakley, head of EMEA commercial research at Savills, noted that a recovery in London's City and West End office markets often precedes a broader recovery across other major Western European centers. This makes the current activity in London a critical indicator for the continent.
"It was the biggest shift in investor sentiment I’ve seen in 20 years in the London market... 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."
– Michael Kovacs, Castleforge Founding Partner
Despite this optimism, challenges remain. Kevin Darvishi, head of leasing at Stanhope, highlighted that high construction and fit-out costs continue to hamper development. However, he also noted that occupiers are willing to pay premium rents for best-in-class buildings in prime locations.
United States Market Rebounds
The U.S. office market is showing clear signs of a post-pandemic turnaround, with large institutional investors re-entering the dealmaking landscape. After a period dominated by private capital, major players like Tishman Speyer and BXP are closing high-profile deals.
According to CoStar data, investment volume in the U.S. has increased by about 25% so far this year compared to the same period in 2024, with total spending exceeding $36 billion. Pricing is also trending upward, especially for premium properties in top-tier markets.
Return-to-Office Mandates Fuel Demand
A key driver of this recovery is the increasing number of large employers mandating that staff return to the office. This has bolstered leasing demand, particularly in tech-heavy cities such as San Francisco, New York, and Seattle, stabilizing the market and boosting investor confidence.
Notable U.S. Transactions in 2025
- Tishman Speyer acquired a Manhattan office building for over $105 million, its first in the city in over five years.
- Kilroy Realty purchased an office campus in Beverly Hills, Los Angeles.
- Vornado Realty Trust bought the office space above the Saks Fifth Avenue department store in New York City.
Marion Jones, a managing director at Avison Young, told CoStar News that most U.S. office markets "are still in the early stages of a valuation reset." However, she added that as interest rates improve, the gridlock in the market is expected to ease, which should lead to increased institutional activity in 2026.
European Markets Face Headwinds
While the UK shows signs of a rebound, continental European markets like Germany and France are grappling with a more subdued environment. Political instability and economic uncertainty are weighing on investor sentiment, leading to cautious behavior and selective investment.
Germany's Cautious Outlook
The mood in the German property market remains muted. A survey of Expo Real visitors found that 44% were optimistic, but recent industry data tells a different story. Transaction volume for the first nine months of the year was €21.6 billion, which is 54% below the 10-year average, according to Savills.
A significant hurdle is the gap between the price expectations of buyers and sellers. Many sellers who financed properties before the 2022 interest rate hikes are reluctant to sell at current market valuations. Piotr Bienkowski, managing director of PXTRE, stated that what the German market needs most is "predictability" in areas like housing subsidies and infrastructure.
France's Optimism Tested
France's investment market showed strong momentum through the summer, highlighted by Union Investment's sale of a Paris business center to Blackstone for over €700 million. The deal attracted 12 bids exceeding €650 million, indicating significant available capital.
However, a gloomy political and economic climate has since tempered that optimism. Raphaël Amouretti, CEO of Catella Property, noted that factors like the downgrading of France's sovereign debt rating "ended up jamming a machine that didn't need it."
Despite the challenges, some large deals are still moving forward, including Blackstone's agreement to acquire the logistics platform Proudreed for €2.3 billion. Analysts at Arthur Loyd France forecast total investment volume for 2025 to be between €14 billion and €16 billion, a slight increase from 2024 but still well below previous peaks.
Investor Strategies in a Shifting Landscape
Global investors are adapting their strategies to navigate the diverse conditions across these major markets. There is a clear preference for specific asset classes and a growing focus on operational real estate.
Thematic Investing Gains Traction
Allen Chilten, head of real estate capital raising at Schroders Capital, observed that investors are showing strong interest in thematic plays like logistics, hospitality, and living sectors. He noted that many investors remain underweight in these popular areas. "It is more of a stock pickers' market at the moment," he said.
Blackstone remains bullish on Europe, particularly the UK. Samir Amichi, the firm's head of real estate acquisitions in Europe, stated, "Western Europe in particular remains attractive to global capital." The firm recently announced its intention to invest up to £100 billion in UK assets over the next decade.
James Stevens of Aviva Investors highlighted the underrealized opportunities in the UK residential sector, where domestic pension funds have less than 2% exposure. He also pointed to logistics in France and student housing in Germany as undersupplied segments with strong potential, suggesting that long-term investors can still execute deals despite short-term political noise.
