T
he European real estate market is expected to remain cautiously optimistic despite growing geopolitical uncertainty and economic concerns. According to a new report by PwC and the Urban Land Institute (ULI), London, Madrid, and Paris are emerging as standout performers for real estate investment and development potential.
Data centers, new energy infrastructure, and student housing top the list of sectors for investment and development in Europe. However, ESG compliance remains a significant challenge for the industry, with over 70% of respondents concerned about environmental issues in 2025.
The report highlights that business confidence and profits are expected to remain stable or increase in 2025, but concerns about economic growth and geopolitical uncertainty persist. Over 80% of survey respondents expect business confidence and profits to stay the same or rise in 2025, with around half predicting increases in both.
London and Paris continue to dominate European real estate investment, ranking first and third respectively for overall prospects for 2025. Madrid's rise to second place highlights the appeal of strong macroeconomic factors and quality of life.
The report also notes that digital risks are a major industry concern, with 59% of respondents naming cybersecurity as a top business concern. The availability of capital remains critical in a real estate market where investor interest is subdued following global uncertainty.
Among the sectors to watch, data centers ranked first in overall investment and development prospects for European real estate, followed by new energy infrastructure, student housing, and logistics. However, lack of suitable stock continues to be an issue for many sectors, including logistics, storage, and various forms of housing.
The report concludes that success will belong to those who can adapt, innovate, and embrace new technologies and sustainable practices in the face of significant challenges such as ongoing instability, regulatory burdens, ESG demands, and digital risks.
