Despite resilient consumer demand and a strong pipeline of deals initiated in late 2024, sentiment across Europe appears to be shifting. While markets like Germany, Poland, and Portugal reported steady yields on prime retail assets, the UK, Spain, Italy, and France saw modest yield compression, driven by investor confidence in select subsegments—particularly retail parks and mid-market convenience assets.

"Yields remained largely stable or slightly compressed in several countries, reflecting transactions initiated in Q4 2024. However, recent sentiment data indicates a more cautious stance going forward," noted Serhii Sushko, Investment Director for Spain, Poland, and the Czech Republic at Focus Estate Fund.

Supporting this view, the European Association for Investors in Non-Listed Real Estate Vehicles (INREV) reported a drop in its Consensus Indicator for the first time since September 2023. This sentiment shift reflects the gap between earlier expectations and the current macroeconomic outlook, with inflation, interest rates, and wage trends varying widely across regions.

Poland, in particular, remains one of the more active retail markets, where retail parks and smaller convenience centres dominate new development. Elsewhere, countries like France and Spain continue to offer significant retail transaction volumes, while Portugal stands out with 57% of its total real estate investment allocated to the retail sector, the highest among the surveyed markets.

The report concludes that while fundamentals remain relatively sound, especially for convenience-led retail formats, the next six months will be critical in determining whether shifting sentiment begins to materially affect deal flow and pricing.