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Real Estate

European Real Estate: Shelter Amid ‘Tariff-fying’ Times?

May 2025 – 8 min read

U.S. policy uncertainty means Europe might now be going from stagnant economic laggard to a potential oasis of calm for investors. Revisions to German spending plans should help to deliver a growth boost to the bloc in 2026 and beyond.

Executive Summary

ECONOMY

  • Trade tensions cast a shadow over the global economic outlook, with possible negative implications on global growth and inflation—and subsequently potentially property values.
  • Country impacts will vary depending on U.S. goods trade exposures, economic growth/sentiment and inflation impacts.
  • Europe’s advantage is that outside the U.S., its trading terms remain unchanged, supporting price stability.
  • Increased growth risks mean further ECB interest rate cuts look likely.

PROPERTY MARKETS

  • Despite the softening economic outlook, property valuations are well placed relative to equities and bonds.
  • The commercial real estate sector remains at the foot of a new cycle, which is typically the best time to invest. Volatility will also extend this window.
  • Building material cost uncertainty could further slow the development pipeline and intensify chronic modern space shortages, building the case for rental growth over the mid to longer term.
  • Investing structurally, through aligning with long-term societal changes, should provide protection through the cycle.

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Paul Stewart

Head of U.S. & European Real Estate Research & Strategy

Joanne Warren

Director, Real Estate Research

Benjamin Thatcher

Associate Director

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