The latest update of Cushman & Wakefield's "DNA of Real Estate" study reveals a differentiated development in European property markets in the second quarter of 2026. While rental growth continues in the core office, logistics, and retail segments, there is a slight expansion of prime yields. This signals the end of widespread yield compression. The market environment remained characterised by geopolitical uncertainties and elevated interest rates, with bond yields staying high for much of the quarter and only softening slightly towards the end.
The European Central Bank's interest rate hike in June led to a further decline in expectations regarding future yield compressions, which impacted capital values. Simon Jeschioro, Head of Capital Markets & Investment Advisory Germany at Cushman & Wakefield, notes that a broad phase of yield compression is not on the horizon. He emphasises that the performance of larger transactions currently depends heavily on individual location and asset selection. Investors should prepare for potentially higher financing costs, although widespread price reductions are not to be expected. High-quality, almost fully let core CBD assets retain their attractiveness and stable demand.
Rental Price Dynamics and Yield Development
Nigel Almond, Senior Director, Global Property Research & Intelligence, EMEA at Cushman & Wakefield, comments that despite the challenging framework conditions, more than three-quarters of European markets showed stable yields, while the number of markets with rising yields increased. Rental growth continued particularly in the office sector, supporting moderate capital value growth in Europe. European CBD prime office rents rose by 1.2 percent quarter-on-quarter and by 4.5 percent year-on-year, driven by strong demand for space.
- —The Benelux region recorded the strongest quarterly rental increase at 2.6 percent.
- —In Germany, the increase was 1.9 percent.
- —The United Kingdom and Ireland showed growth of 1.6 percent.
- —Rotterdam stood out with an increase of 13.2 percent to 385 EUR per square metre per annum, due to recent lettings and higher asking rents for new builds.
Parallel to rental growth, a turnaround in office sector yields was observed. Seven European office markets reported yield expansions in the second quarter – the highest number in two years. Only two markets still recorded yield compression. This led to an increase in the average European prime office yield by 3 basis points to 5.39 percent.
Regional Resilience and Investor Focus
Southern Europe, as well as Central and Eastern Europe, proved to be the most resilient regions. Both regions combined comparatively strong rental growth with predominantly stable or slightly declining yields in the second quarter. They thus maintained their attractiveness for investors in the current market environment. The continued market liquidity is contrasted by a stalling of many transactions. Investment decisions are increasingly determined by the specific quality of individual locations and properties. High-quality core properties in established prime locations remain the preferred choice for institutional investors.
