European real estate markets are presenting themselves with changed conditions, as shown by the current “Realometer” analysis from Real I.S. Medium-term return prospects are primarily determined by rental growth and less by a compression of yields. At the same time, interest rates remain at an elevated level, and the polarisation of user markets continues to increase. These developments emphasise the increased importance of careful selection of locations and the quality of real estate properties.
The originally anticipated acceleration of economic growth has not materialised so far. The aggregated GDP growth expectation for the countries surveyed in 2026 has been reduced from 1.7 to 1.2 per cent compared to the February assessment. This led to a deterioration in the country rating for Germany, France, and Belgium, among others. Within the risk-return matrix, Denmark, the Netherlands, and Luxembourg show an advantageous combination of comparatively high dynamism and low risk.
Marco Kramer, Head of Research & Investment Strategy at Real I.S., points out that the increasing differentiation of real estate markets opens up new opportunities for investors, but at the same time requires very targeted selection. He emphasises that the choice of usage type, location, and property quality is now decisive. Particularly in an environment of higher interest rates, sustainable rental growth and stable ongoing returns are central to investment strategies.
In the office sector, a clear polarisation is manifesting between high-quality properties and older or peripherally located ones. Acquisition yields have stabilised, while rental price forecasts have moderately improved. German A-cities such as Berlin, Hamburg, Cologne, and Munich show comparatively low risk in a location comparison. Copenhagen and Sydney appear particularly dynamic.
Retail remains a fragmented market, with food and specialist retail concepts showing stability. Location assessments are developing heterogeneously: risk parameters in Southern Europe (Spain, Portugal, and Italy) are improving compared to the first quarter of 2026, while they are increasing in France and Finland, as well as in Ireland and the United Kingdom. Logistics properties benefit from structural drivers such as investments in infrastructure and defence, which generate a positive long-term outlook. Here, the Netherlands and Sweden show low risk with good dynamism.
Hotel properties currently achieve the highest overall rating among the sectors examined. Improved forecasts for revenue development strengthen the yield assessment, with Amsterdam and Frankfurt being particularly attractive due to a high yield assessment at comparatively low risk. In the residential segment, the structural demand surplus and rising rents continue to ensure stable cash flows. Despite a moderate deterioration in the rating at almost all surveyed locations, residential properties are expected to remain the dominant asset class in the investment market in 2027. The Hague and Dublin show the highest yield assessments; Amsterdam also offers an attractive risk-return combination.
