European real estate transactions volumes are down 10% so far in 2026, compared to the same time last year, according to the latest research from MSCI.
The latest MSCI study found that industrial investment fell to its lowest level in the first half of 2026 since 2017, while office activity was still around half the levels recorded during the previous market cycle.
Apartments was the only major sector to record robust growth in H1, driven by consolidation in the UK student housing market and strength in the Netherlands and Spain, MSCI said.
Spain was the one market bucking the trend, as apartment investment was up by 400% in comparison on H1 2025 because of several large deals, including Brookfield’s acquisition of a €1bn portfolio from Fidere and Healthcare of Ontario Pension Plan purchase of a €690m portfolio from Ares.
The number of completed office and retail in the UK deals fell to their weakest H1 levels on record. Meanwhile the structural weaknesses in Germany’s property market continued to impact dealmaking, MSCI said.
US leads capital flows into Europe
Cross-border investment volumes into Europe were at their lowest level since 2013. MSCI said US investors were still the largest source of capital behind this, but they were increasingly weighing European opportunities against those in Asia-Pacific and those centred on the AI boom.
Meanwhile, Asian buyers have largely retreated, with acquisitions in the first half of 2026 down by close to 65%, despite the first major purchase by South Korean investors since 2022.
London and Paris are Europe’s top property markets so far in 2026
MSCI’s research found that London office investment was slightly slower than H1 2025, despite some big deals, including Barclays’ purchase of its Canary Wharf office for over €800m.
Office transaction yields have come under upward pressure from higher borrowing costs, with central London yields back above 6%, a level last seen in 2024.
“Despite the yield expansion, there is still only around a [100bps] gap between central London offices and 10-year gilts, well below the long-term average, implying there may be further pressure on yields in H2”, MSCI found. Paris activity is down around 20% in comparison with H1 2025.
Tom Leahy, head of EMEA real assets research at MSCI, said: “The market appears trapped in a cycle of recovering confidence and repeated interruptions by external shocks. As a result, deal volumes have remained low, but the weakness is far from universal across Europe.
“Where tight supply and robust demand is pushing up rents, or investors can benefit from structural tailwinds, there are segments of the market where deal volumes are above their 10-year average. This includes UK and Spanish apartments, Italian retail and Spanish offices. These are signs that capital has not gone into hibernation, even if none of the segments move the European total on their own.
“There are fewer active investors right now, and as the market continues to stratify, it demonstrates that capital is highly selective. The Spanish market shows that robust economic growth coupled with a relatively open and dynamic real estate market can attract a diverse array of capital.
“The next cycle is likely to be characterised by continued geopolitical volatility and a less supportive interest rate environment, but MSCI data shows those buyers who commit to the market in the earliest stages of the recovery have tended to outperform.”
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