European real estate professionals expect the sector’s cyclical recovery to take longer than previously anticipated, driven by persistent macroeconomic headwinds and high interest rates.
According to the Emerging Trends in Real Estate Europe 2027 report by PwC and the Urban Land Institute (ULI), business profitability expectations have softened, with 45% of surveyed senior property executives expecting an increase in 2027 compared with 50% last year.
The report, based on a survey and interviews with 1,498 senior property professionals across Europe, revealed that softened expectations were driven by persistent macro headwinds.
Key pressures include higher bond yields, inflation, higher-for-longer interest rates, volatile construction costs and rising social unrest, all contributing to a prolonged transition period for the continent’s property market.
Beyond macroeconomic factors, 38% of respondents cited regulatory uncertainty as a top-three business concern. Also, national political stability emerged as a key issue for 41% of participants over the coming year, particularly as Europe enters an election super-cycle.
According to the report, capital remains concentrated in Europe’s primary, highly liquid markets, though investors are progressively diversifying into Southern European hubs and Warsaw.
Regional rankings reflect this shift towards long-term fundamentals and liquidity: London, Madrid, and Paris maintain their lead for investment and development prospects, while Munich rose to fourth place, overtaking Berlin as Germany’s top-ranked market.
Milan climbed two places to fifth, while slips for Amsterdam, Berlin, and Hamburg allowed Lisbon to enter the top ten.
Jean-Baptiste Deschryver, PwC EMEA real estate leader, said: “The European real estate outlook for 2027 is more nuanced than a simple narrative of a stalled recovery. Despite a challenging near-term economic backdrop, occupier demand remains resilient.
“Meanwhile, the increasing influence of family offices and other sources of private capital is helping to offset the continued caution of core institutional investors. Our research suggests that this divergence is creating meaningful opportunities, particularly where market dislocations have opened up attractive entry points.”
Simon Durkin, CEO, ULI Europe, said: “While a longer than expected recovery isn’t what we’d hoped for European real estate, this year’s survey does reveal our industry’s great capacity to adapt to the continued uncertainty, and it highlights its resilience as it adapts to a prolonged period of transition.
“Undoubtedly, there are still many challenges ahead, from the housing crisis to climate risk, but clearly there are important opportunities too.”
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