Investment in U.K. real estate cooled in the second quarter of 2025, with total volumes slipping 11% year-over-year to €13.9 billion, according to MSCI’s latest data. Despite this decline, the U.K. held its position as Europe’s leading real estate investment hub, attracting more than twice the capital seen in Germany, Europe’s second-largest market, according to BE News.
London stood out as the top city for property investment across Europe, though overall activity in the capital dropped 17% in the first half of the year compared to 2024.
Notably, the office sector bucked the downward trend — investment in U.K. office properties surged 27% during this period, driven largely by demand for prime Central London locations. This signals continued investor confidence in office assets despite larger market caution.
Across the continent, commercial property investment slowed in H1 2025 amid growing concerns over U.S. trade tariffs and their potential ripple effects on Europe’s economic outlook. Total commercial real estate transactions in Europe fell 10% to €46.2 billion in Q2, with first-half activity down 7% at €91.7 billion compared to the previous year.
The market’s hesitancy reflects the typical lag in real estate transactions following geopolitical or economic shocks, given the sector’s illiquid nature. However, there are signs that investment momentum could return.
The volume of deals lined up for completion at the start of July hit its highest level in three years, supported by falling Eurozone interest rates and pockets of strength in occupier markets — particularly in some of Europe’s most liquid office sectors.
If these conditions hold and no new disruptions arise, a pickup in real estate investment could unfold in the latter half of 2025, especially in office spaces and other key commercial segments.
