European Real Estate Market Downturn: Sales Plummet & Recovery Denied

frankfurt, Germany – The Trianon skyscraper in Frankfurt, a meaningful property on the German market, has been put up for sale by its receiver, Reuters reported last week, signaling a notable event for the country’s currently challenged real estate sector.

the German property market is facing intense competition for investment capital, with private credit markets attracting considerable interest. In the first half of 2025,private credit funds in Europe secured $39.9 billion, nearly double the $20.6 billion raised by property funds, according to data from PREQIN. Both sectors are on track to surpass their 2024 performance, with property funds already exceeding their previous year’s results.

Despite these figures, investor sentiment towards European real estate remains cautious. In June,attitudes toward real estate in Europe reached their lowest point in over a year,as indicated by the Inrev branch organization.This trend mirrors a similar deterioration observed in the U.S. market this year.

“In some parts of the market, the recovery is underway,” stated Cecil Retro, head of private markets at the insurance company Phoenix’s investment unit. “However, there are assets adn sectors that are not popular, there is almost no liquidity, and there are more difficulties.”

Germany, Europe’s largest economy, is notably impacted by the downturn in its property market. Sales declined by an additional 2% in the first half of this year, according to consulting firm CBRE. Konstantin Cortman, CEO of JLL Germany, anticipates that transaction volumes will not increase and that the market’s initial recovery will be gradual. “The beginning will not be very dynamic,” Cortman commented.

While high interest rates continue to necessitate careful investment strategies for real estate, the potential influx of international capital from the U.S. market’s instability could provide a boost to European real estate. Property sector leaders suggest that this shift could benefit the European market.

Indicative of this trend, at least two German clients of PGIM have reportedly canceled planned real estate investments in the United States, re-prioritizing opportunities in Europe and Asia, according to Ferrante.