London, Warsaw, 5 November 2025. With a significant increase in industry concerns around the impacts of deglobalisation among real estate leaders in Europe, prospects for renewed investment activity continue to be tempered by geopolitical and economic uncertainty resulting in the overriding sentiment among leaders having shifted from last year’s cautious optimism to pragmatism, according to the latest Emerging Trends in Real Estate® Europe 2026 report by PwC and the Urban Land Institute (ULI).

The proportion of real estate leaders concerned about the impact of deglobalisation has more than doubled over the past two years to 70% according to Emerging Trends in Real Estate® Europe 2026. In addition, broader international political instability (90 percent) including in Europe, the escalation of global conflicts (86 percent), and Europe’s economic growth prospects (77 percent), are raising even greater concerns.

In the context of an uncertain economic recovery, uneven occupier demand, and concerns around construction costs, resource availability and regulation, business confidence among European leaders has fallen slightly (45 percent compared to 50 percent), although expectations for improved business profitability by end of 2026 have risen to 50 percent (from 46 percent).

Geopolitical and subsequent economic uncertainty is influencing capital deployment. With a continued elevated interest rate environment, real estate, especially core, faces fierce competition from other asset classes such as infrastructure and bonds. There continues to be a gap between bid-ask prices around core investment returns—though they are moving closer. In this context, much of the capital flowing into real estate favours the ‘debt route’, providing better risk/return prospects compared to equity, especially for core real estate. In that respect, a notable change year on year is the equity expected to flow towards real estate comes from less traditional, more entrepreneurial sources, such as private equity funds, high net-worth individuals and European and US family offices.

Simon Chinn, Vice President, Research & Advisory Services, ULI Europe, comments, “This year’s report provides clear insights into a resilient industry that is continuing to deal with uncertainty around recovery and diverse operational and investment challenges. There is a sense that sentiment among industry leaders has shifted from tacit optimism towards taking a more practical approach to address the market conditions as they exist, though notably actual business confidence remains on a par with last year. The report also reveals important opportunities for the industry to grasp, from innovation to diversification and leadership, as well as concerning shifts in how the industry currently regards sustainability, despite decarbonisation’s ascendancy on the agenda.”

Gareth Lewis, PwC Director, adds, “Our report reveals that Europe’s real estate industry is navigating a challenging but transformative phase as several long-standing tailwinds fade. Even so, optimism remains strong — senior leaders see this as a chance to reassert the sector’s relevance, with capital ready to support those shaping its next phase of growth and evolving its value proposition to meet changing market realities.”

Top Performing Cities and Sectors

Given the increased risk and varied growth outlooks across Europe, country selection is becoming a more prominent investment consideration among investors and managers. There is a strong focus on mature markets with high liquidity, robust growth prospects, and stable democratic and legal functionality.

Emerging Trends in Real Estate® Europe 2026 also reveals that London, Madrid, Paris and Berlin have continued to lead the city rankings for European real estate investment and development prospects for the fourth year running, also topping MSCI’s city transactions volumes over the past year. This echoes a selective focus on cities and regions that combine strong prospects and liquidity, albeit a city’s economic growth will be distinct from often mixed country outlooks.

Elsewhere in the top ten, German cities have again secured strong positions overall, though they have slipped down the rankings year-on-year amid the prevailing, uncertain outlook facing the country both economically and for real estate (particularly its open-ended fund sector). Despite the country’s weaker economic prospects, these cities are seen as relatively resilient and strongholds in European real estate, with robust underlying fundamentals particularly in housing and logistics. Berlin remains the strongest German city contender, on the back of its large liquidity and what an investor cited as its international flare.

In addition, Amsterdam has risen one place in the rankings, securing fifth place, while Milan has maintained its position at seventh, and Barcelona has re-entered the chart at eighth place.

Reflecting a prevalent need for geographical and sector diversification, many niche, operational sectors continue to dominate the rankings for investment and development prospects in Europe, despite currently attracting comparatively lower capital than traditional core sectors like office. Data centres, new energy infrastructure and student housing all illustrate the overall direction of investor interest which is more focused on the long term and a greater emphasis on major demographic, digitalisation and decarbonisation trends.

Lisette van Doorn, CEO, ULI Europe, comments “We are at a very interesting, yet challenging, point in time for real estate, with so much structural change providing unprecedented opportunities In Europe, including supporting the energy transition, digitalisation and AI, strengthening our defence and knowledge ecosystems and around ongoing urbanisation. However, in the short term the industry is still trying to get to grips with more uncertainties. Successful players are those that understand the fundamentals of real estate and pro-actively operate assets, working in partnership with their users and occupiers and take a long-term value perspective.”

The rise of AI

This year’s survey reveals that Artificial Intelligence is cited as a rapid and growing driver of change, with the real estate industry seeing a significant increase in the use of AI and/or machine learning – 75 percent of respondents are applying AI-based solutions compared to 51 percent last year.

Over the next 18 months, AI and/or machine learning is expected to be deployed by the majority of respondents across activities ranging from marketing and leasing (90 percent) to property management (87 percent), and planning and design (84 percent), as well as operational (86 percent) and asset management (86 percent) tasks.

ESG: Sector Balances Long-Term Goals with Short-Term Pressures

A long-term commitment to decarbonisation continues to be of critical importance to real estate. However, there has been a shift in how the environmental, social and governance (ESG) agenda is considered, with some pushback evident on its perceived layers of regulation and bureaucracy, and even in the use of the acronym itself.

Almost half of respondents have adjusted their strategies in response to macroeconomic uncertainty while asset managers have been required to clarify their approach to ESG and sustainability more clearly and demonstrate its connection to value and investment performance. Reflecting this shift, 85 percent of respondents now see ESG as very or somewhat important (compared to 89 percent year on year) while those that regard ESG as a driver of decision making and strategy over the next five years has fallen to 21 percent from 40 percent a year ago.

Finally, the Emerging Trends in Real Estate® Europe 2026 explores the potential for real estate to play a more strategic role in enhancing European competitiveness.  The report examines this significant opportunity for the industry to play its part in Europe’s technological transformation, and the challenges that will entail in fostering skills, resilience and mobility and encouraging growth, prosperity and creativity.

Jean-Baptiste Deschryver, PwC EMEA Real Estate Leader, comments, “Geopolitical uncertainty remains the great disruptor – but it is also compelling the industry to think more strategically about risk and resilience. All this is happening while real estate’s value proposition is being redefined – not as a passive asset, but as dynamic infrastructure that should play a significant role in Europe’s competitiveness.”

Poland and Warsaw: Strong fundamentals, steady outlook

In this year’s edition of Emerging Trends in Real Estate® Europe 2026, Poland has once again been recognized as one of the most resilient real estate markets in Central and Eastern Europe. Warsaw maintained its position as the regional leader, ranking 12th among 32 cities analyzed for investment and development prospects. The Polish capital outperformed Prague (23rd) and Budapest (29th), reaffirming its role as a key market for pan-European investors. According to the report’s authors, Warsaw combines attractive yields with a mature market structure, offering a stable legal and economic environment and a growing base of international tenants. Despite geopolitical tensions in the region, Poland retains solid macroeconomic fundamentals—low unemployment, positive financial leverage, and a balanced relationship between supply and demand.

Kinga Barchoń, Leader of PwC Poland Real Estate, emphasizes: “Over the past few years, the real estate market in Poland and Central and Eastern Europe has undergone significant change. The year 2025 has been widely perceived as a transitional period, characterized by adaptation to a lower interest rate environment, continued geopolitical uncertainty, and a search for a new price equilibrium. In Poland, investment volumes rebounded in 2024 after a sharp decline in 2023. This phase of ‘reset’ signals a return of liquidity – albeit in a selective way. Investors are focusing on assets with strong fundamentals and low operational risk. Secondary assets and speculative projects are under increasing pressure, while buyers concentrate on prime properties in attractive locations or in sectors supported by long-term structural trends, such as logistics, housing, energy infrastructure, and data centers.”

As PwC and ULI analysts note, investors increasingly view Warsaw as a market comparable to Western European capitals in terms of transparency, liquidity, and sector professionalism. At the same time, the city remains attractive for family offices and value-add funds seeking long-term asset appreciation. “Warsaw continues to strengthen its position as the most mature investment market in Central and Eastern Europe, combining economic stability with growing institutional maturity. For global capital, it is a city that offers both investment security and genuine growth potential,” says Marcin Juszczyk, Chair of ULI Poland.