Europe’s commercial real estate sector is grappling with a prolonged downturn, as hopes for a post-pandemic recovery fade amid investor caution and global economic headwinds. According to revised MSCI data, property sales in Q1 2025 remained flat at €47.8 billion, less than half the volume recorded three years ago. Early indicators point to an even weaker Q2, with cross-border investment across EMEA falling 20% year-on-year to €17.2 billion—the worst April–June period in a decade.
The market’s inertia has led experts to dub the current phase “zombieland,” marked by stranded assets, low liquidity, and a lack of momentum. Sectors once considered resilient—like data centers—are now seeing sluggish activity, while out-of-town offices and aging shopping malls struggle to attract buyers.
“We have ‘zombieland’... no recovery, stranded assets, no liquidity coming back,” said Sebastiano Ferrante, Head of European Real Estate at PGIM.
Germany, Europe’s largest economy, has been particularly hard hit, with sales down another 2% in H1 2025, and landmark properties like Frankfurt’s Trianon skyscraper entering distressed sales. In London, Brookfield shelved the sale of its CityPoint tower after bids fell short, opting instead to restructure its debt1.
Investor sentiment has soured, with INREV reporting its lowest confidence levels in over a year. Meanwhile, private credit funds raised $39.9 billion in H1, nearly double the capital flowing into real estate funds, signaling a shift in investor preference.
Despite the gloom, some pockets of opportunity remain. Logistics and hotels are still attracting selective interest, and under-supplied rental housing continues to draw capital. But overall, the market remains fragmented, with sellers reluctant to adjust prices and buyers wary of long-term risks.
“In some parts of the market the recovery is well under way. However there are out-of-favour assets and sectors where there is almost no liquidity and more pain to come,” said Cecile Retaureau, Head of Private Markets at Phoenix Group.
As Europe’s property sector navigates this uncertain terrain, the path to recovery will likely be slow and uneven—dependent on price corrections, policy clarity, and renewed investor confidence.
