The European real estate industry has shifted from cautious optimism to pragmatism as geopolitical and economic uncertainty continues to temper investment activity, according to the latest report by PwC and the Urban Land Institute.
Concerns about deglobalisation have more than doubled over the past two years, with 70% of industry leaders now worried about its impact. International political instability (90%) and escalation of global conflicts (86%) rank as the top concerns, while Europe's economic growth prospects worry 77% of respondents.
Despite these challenges, business confidence remains stable at 45%, with 50% expecting improved profitability by end-2026. The industry is adapting by focusing on operational returns and value-add investments rather than relying on capital appreciation.
"This year's report provides clear insights into a resilient industry that is continuing to deal with uncertainty around recovery and diverse operational and investment challenges," said Simon Chinn, Vice President, Research & Advisory Services, ULI Europe. "There is a sense that sentiment among industry leaders has shifted from tacit optimism towards taking a more practical approach to address the market conditions as they exist."
London, Madrid, Paris, Berlin and Amsterdam rank as the top five European cities for investment and development prospects for the fourth consecutive year. These cities combine strong liquidity with robust growth prospects and stable democratic institutions, making them attractive in uncertain times.
Warsaw maintains its position as the leading CEE market, ranking 12th overall and outperforming Prague (23rd) and Budapest (29th). The Polish capital offers attractive yields with a mature market structure and stable legal environment.
Data centres, new energy infrastructure and student housing continue to dominate sector rankings, reflecting the industry's focus on operational assets with infrastructure-like characteristics. AI adoption has surged, with 75% of respondents now using AI-based solutions compared to 51% last year.
The report reveals a shift in ESG priorities, with only 21% now viewing ESG as a driver of decision-making over the next five years, down from 40% previously. However, energy efficiency credentials remain critical for securing finance.
