European Investment Atlas

TIME Score

Stabilisation holds as macro drivers soften

The European All-Property TIME Score moved slightly lower in Q1 2026, reflecting a moderation in cyclical momentum and growth expectations. Tighter financing conditions, rising swap rates and weaker economic forecasts across several core economies have contributed to this shift.

Despite these headwinds, the market remains firmly within the stabilisation phase. All sectors are clustered around the same level, indicating a consistent, if more measured, recovery trajectory. Logistics and retail continue to sit marginally ahead, while the office sector remains more cautious, reflecting ongoing structural challenges and investor selectivity.

Overall, the picture is one of resilience. The market is not retreating, but rather adjusting to a more uncertain macroeconomic backdrop.

Fair Value Index

Valuation upside moderates as bond yields rise

The Fair Value Index declined to 74 in Q1 2026, signalling a reduction in the degree of underpricing across European real estate. This movement has been driven by rising government bond yields and increasing interest rate expectations, which have reduced the potential for further yield compression and softened capital growth forecasts.

As a result, valuation gaps have narrowed across a growing number of markets. Several locations have shifted from underpriced to fairly priced, and a small number are now considered fully priced. However, underpricing remains the dominant classification across Europe, indicating that opportunities persist, albeit in a more targeted and selective form.

The adjustment has been broad-based across sectors. Logistics, experienced the largest correction, yet continues to offer the greatest concentration of underpriced opportunities.

Key trends

• Logistics saw the largest correction following strong prior performance
• 32 markets were downgraded, mainly from underpriced to fairly priced
• Fully priced markets emerged, 9 out of 119
• Underpricing remains the dominant classification, 56% of markets

This shift signals a transition from broad-based repricing to more targeted opportunity identification.

Opportunity landscape

Combined TIME Score & Fair Value Index

The combined framework highlights how opportunities are evolving:

• Logistics & retail: Positioned in the investment “sweet spot”
• Residential & office: Located within the strategic matrix
• Hospitality & all-property: Between the golden and strategic matrices

The office sector remains the most selective, with performance increasingly dependent on:

• Asset quality
• Location
• Leasing prospects

Prime office space continues to demonstrate strong rental growth and sustained demand despite wider sector bifurcation.

Debt

Financing market holds through the shock

The debt market has remained resilient despite the recent increase in volatility. Following a short pause in activity, lenders have returned quickly, and capital availability remains deep and diverse across banks, insurers and alternative lenders. Margins have adjusted only modestly, and financing continues to underpin the functioning of the investment market.

However, the main constraint on transaction volumes is not the availability of debt. The key challenge lies in the willingness of equity investors to transact at acceptable pricing levels. The gap between buyer and seller expectations continues to limit activity across markets and sectors.

In this context, debt has played a stabilising role in the recovery, supporting refinancing, recapitalisation and market liquidity. Yet, moving forward, the pace of transactions will depend increasingly on whether equity conviction can match available financing.

Strategy

Capital stacked, strategies evolving

Investor interest in European real estate remains strong. Capital raising has increased significantly, and institutional allocations to the sector are rising once again following a period of decline. As a result, capital is building on the sidelines, ready to be deployed.

At the same time, strategies are evolving in response to heightened uncertainty. The initial momentum expected at the start of 2026 has cooled, as investors reassess inflation risks, interest rate trajectories and geopolitical factors. Nevertheless, activity is beginning to stabilise as buyers and sellers adapt to the new environment.

Demand remains broad, spanning sectors and geographies, with particular interest in assets offering resilient, long-term income. Logistics and residential continue to attract capital, while retail and select office opportunities are also seeing renewed attention where fundamentals support the investment case.

What's Next

Recovery matures with valuation headwinds

The European investment market is transitioning into a more mature stage of recovery. While the underlying trajectory remains positive, recent developments have introduced headwinds that are have slowed momentum and increased uncertainty. Financing conditions have tightened, and growth expectations have moderated slightly.

Despite this, the core foundations of the market remain resilient. Strong occupier fundamentals, supported by labour markets and supply constraints, continue to underpin performance. Should geopolitical uncertainty ease, investment activity could regain pace relatively quickly.

Selectivity will define performance

As markets move closer to fair value, the drivers of performance are shifting. The phase of broad-based repricing is giving way to a more selective environment, where returns will depend increasingly on income growth, asset quality and operational execution.

Opportunities remain widespread, but they are less uniform. Investors will need to focus on markets with strong supply-demand dynamics, resilient income prospects and attractive relative pricing.

European real estate continues to offer compelling opportunities, but success will depend on conviction, discipline and the ability to identify the right assets in an increasingly selective market.