As the Expo Real property conference gets underway in Munich, here's a look at the performance of these major markets
September, traditionally the month when the real estate industry gets down to some serious work after the summer break, has come and gone. As Expo Real, the key international real estate conference, gets underway Monday in Munich, Germany, here's a comparison of the performance of four of the largest commercial property markets, the United Kingdom, United States, France and Germany, and a review of the major themes of 2025 for each.
So far, there's cautious optimism in the United Kingdom, a strong rebound in the United States, lingering stagnation in Germany and a slowing recovery in France. Together, the trends reveal a global market still finding its footing at a time of improving sentiment, selective investor confidence and regional economic uncertainties.
Cautious optimism in the UK
A number of large investment and leasing transactions in September in all the main asset classes, notably hotels and offices, suggests that the United Kingdom's commercial property should have a pleasingly strong end to 2025 in terms of deals. At the same time, confidence remains fragile, and more activity cannot come soon enough.
A stuttering United Kingdom economy and an increasingly under-fire government remain a drag on transactions, as well as the curious decision to delay the Budget, the United Kingdom's key financial announcement for the year, until late November.
In the second quarter, brokerage Colliers reported United Kingdom commercial real estate investment volumes reached £12 billion, 15% below the five-year quarterly average, but an improvement on the first quarter’s £10.3 billion. Industrial properties led the way, accounting for 24% of total investment, followed by offices at 22%, retail at 18% and residential, including student accommodation at 16%. Looking ahead, Colliers continues to expect a slow, unspectacular recovery.
But it is not hard to find signs of increasingly positive activity in the third quarter.
The hotels sector has been a standout, with Savills now suggesting U.K. investment hit £1.04 billion in the third quarter, a 28% year-on-year increase. The lift has been driven by single-asset transactions, which accounted for 92% of activity and rose almost 60% above the 10-year third-quarter average, even as overall investment volumes remained 5% below long-term trends. Bigger London office sales are also increasingly back. The litmus test is no doubt Nuveen's disposal of the "Can of Ham" building at 70 St. Mary Axe. Earlier this year, talks to sell the building to Blackstone for more than £300 million ended, with Nuveen presumably deciding it could get a better price with a bit of patience.
The building is now under offer to Capreon, the investment company of the Noé family, and alternative investment manager Hayfin Capital Management for around £340 million, representing a yield of about 5.6%. That would be the largest price achieved for a London office building in three years.
Great Portland Estates has gone under offer for one of the West End's largest individual office sales, One Newman St. in Fitzrovia, to Royal London Asset Management for around £250 million or a sub 4.5% net initial yield. Hines is closing on a sale of The Burlian, its retail and office development straddling Oxford Street and Bond Street, for close to £200 million or a 3.75% net initial yield, while Landsec has exchanged contracts to sell its Queen Anne's Gate, SW1, office block to Arora Group for £245 million, for a luxury hotel makeover.
The disposals point to a clear recovery in investor sentiment. It is an important bellwether for other European real estate markets because, as Savills' head of EMEA commercial research, Mat Oakley, points out, a recovery in City and West End offices typically means recovery across other key centers in Western Europe.
Michael Kovacs, Castleforge founding partner, is bullish that recovery is underway in London offices: "Occupier demand has been strong for the past five years in London but curiously, investors had remained on the sidelines. It’s almost like when Blackstone shouted 'Go!' in the first quarter by buying office buildings in central Tokyo and Midtown Manhattan and was rebuffed in the City of London, other investors" came to the conclusion they were also allowed to invest in offices.
He added that "whether it was causation or mere correlation, it was the biggest shift in investor sentiment I’ve seen in 20 years in the London market, and made for a very busy rest of the year. I think when we look back, we’ll remember the summer of 2025 as the moment a switch flipped and the market came back to life."
Stanhope Head of Leasing Kevin Darvishi is positive but more cautious, pointing out that the London office development market continues to be hampered by high construction and fit-out costs, though he did say that the situation has improved significantly.
"The reality is that occupiers are prepared to pay prime rents to upgrade and move into best in class accommodation. There continues to be a slowdown in what I would term the Grade A-minus market, with some of these buildings slightly stuck, but those buildings in the best locations, with the right quality refurbishment and the right floorplates, continue to attract occupiers. That’s not to say you can apply a cookie cutter approach to development. It’s about identifying the unique selling point of a particular asset and amplifying it through the design process. Take the South Bank, it's all about being on the River," he said.
In terms of how this translates to capital markets, Joe Binns, head of investment at Stanhope, points out that new supply of best-in-class office space is down, and there is very little coming through over the next three to four years. In response, occupiers are looking at their options much earlier than they would have done, in some cases for lease expirations as far away as 2035.
He said that "on the other hand, it’s been a difficult investment market for buyers and sellers alike. The negative rhetoric around offices has made it difficult to persuade global capital to enter the market, and at the same time there has been very little distress, so we haven’t seen the price correction that would encourage more buyers. But it looks like prices have definitely bottomed out, which is giving more confidence to both vendors and buyers. We have a high conviction in the opportunity today to buy and deliver the right product to the market."
James Emans, joint head of United Kingdom investment at Savills, describes 2025 so far as an "extraordinary year" for real estate in the United Kingdom: "There was a lot of momentum at the outset of the year. But you only have to look at volumes up to [the first half] to see that the additional political risk that came wiped a lot of that out. But we are also getting back to a place where that positivity is reinvigorating itself. "
He added that "the reason, in part, is investors were downbeat on offices because a large number of counter cyclical investors" are United States private equity firms and sentiment there was poor for offices. He added that now there is much more positivity about take up in a lot more of the major United States cities. A lot of the U.S.' "private equity houses are coming to talk to us about data and price points now," he said.
The shopping center market is also set for a number of major transactions in the coming weeks, with four major processes underway. They are Braehead near Glasgow, Merry Hill in the West Midlands, Silverburn in Glasgow and the Lexicon in Bracknell.
James Stevens, head of investment – global real estate, Aviva Investors, agrees that a number of factors suggest a market pick-up has arrived in the United Kingdom and Europe. He said the vital ingredient is not to repeat domestic market biases in other countries.
“That’s how we have the right conversation with the right capital, even in places we are not based. We’re speaking with a lot more capital from different parts of the world who have decided where they want to invest and now it is about timing," he said.
He added that the United States tariff position prompted a lot of people to re-evaluate some of their investment decisions, "but in the last six to nine months, we’ve seen a general sense that, structurally, there should be more allocation to Europe. Another critical factor is that there has been a tipping point recently, with equity offering better value relative to debt. So the question is, how do we enter into a market where we want to be more equity focused than debt?"
Stevens also said that on the structural side of real estate, on average, United Kingdom pension funds have less than 2% exposure to residential, far below other global institutions in other regions. A lot of global investment appetite is also biased towards residential compared to Europe and the United Kingdom, so his firm concludes there are underrealized opportunities.
In the United Kingdom, in the final quarter of the year, Stevens does not expect a huge amount of investment in commercial real estate. “Six months ago I would have thought there would be more, but the market still has depth. In London, we’ve seen strong demand for super-prime West End offices, while there is less demand for more medium-term income. In logistics and retail warehousing, we don’t think there’s much quality stock at good prices presently.”