From geopolitics to green buildings, Europe’s real estate looks ahead
A survey from the Urban Land Institute and PwC shows that confidence remains fragile as European real estate faces up to geopolitical turmoil, sustainability pressures and tenant demand uncertainty
As we race towards 2025, how are Europe’s real estate players feeling about the future? According to a new report from the Urban Land Institute and professional services giant PwC, market sentiment remains mixed. Any comfort to be drawn from more benign interest rates is being offset by ‘fragile economic growth and growing geopolitical uncertainty’.
‘Emerging Trends in Real Estate: Europe 2025’, based on a survey of 1,214 property professionals, offers a nuanced view of the market. It predicts greater business confidence and profits for 2025 than the previous year, but notes that there are caveats at every turn: European markets are grappling with a ‘new normal’ marked by geopolitical tensions, ESG pressures and variability in tenant demand.
Adapting to global disruptions
The ongoing political and economic instability in Europe and further afield has significantly impacted real estate investment dynamics, with 83 per cent of respondents citing the escalation of wars in Europe and the Middle East and 77 per cent referencing the volatile European economy.
‘European real estate has never been more acutely aware that it is part of a global machine’
According to the report, ‘the European real estate industry has never been more acutely aware that is it part of a global machine’, with global developments ranging from evolving policies and trade relations in China and India to US Federal Reserve rate cuts. With the recent election results announced in the US, further shifts in the global landscape are likely on the horizon.
Balancing profit and purpose
The report spotlights ESG as remaining a major challenge for real estate, both in the short and long term. According to the results of the survey, over two thirds of respondents are concerned about environmental sustainability and decarbonisation requirements in 2025, with 70 per cent flagging the issue for the next five years. The report highlights an industry-wide push for real estate to be fit for purpose, which is in line with the findings from last year’s report.
However, despite all the challenges associated with ESG in real estate, the report highlighted how this year, it is the ‘S’ in ‘ESG’ that is rising in relevance. This is in line with what WORKTECH Academy predicted in its most recent Q3 Trend Report, which suggested that after an early focus on bolstering green credentials, social and community initiatives will be the next big wave to hit the ESG agenda.
Nearly 60 per cent of the survey’s respondents believe that the health and wellbeing of occupiers will increase in importance over the next 18 months, highlighting a move toward broader interpretations of sustainability beyond environmental concerns, including social impacts and wellbeing.
The location factor
In acknowledging that the real estate market is still coming to terms with changing workplace dynamics, the report identifies location as the factor that is most important in driving occupier strategies. Survey respondents stress that ‘central locations with an environment of services amenities, and cultural offer’ have become the focus in recent years.
Many companies are now investing in high-quality spaces, especially in prime urban locations, to attract top talent and address productivity needs. According to the report, ‘there is broad consensus among interviewees that office demand will ultimately coalesce around high-performing buildings’.
‘There is broad consensus that office demand will coalesce around high-performing buildings’
Key trends further include fluctuating office demands, with suburban office spaces ranking lowest in terms of growth potential. The report highlighted that the gulf is widening between occupier and investor demand for prime office space in the best locations and secondary buildings located in more peripheral areas.
Strong transport connectivity has become essential for cities favoured in the report on office investments, as commuting times have gained importance since the Covid-19 pandemic. One interviewee stated that they favoured cities where ‘infrastructure plans are committed’, highlighting that long-term investment in transport and urban development is crucial for future growth.
Read the full Urban Land Institute and PwC report ‘Emerging Trends in Real Estate: Europe 2025’ here.
Read an extract from the report on the office market in our Innovation Zone, which gives privileged access to premium content for WORKTECH Academy members and partners.
