Experts find little consensus in direction of European real estate

European real estate is facing a credibility crisis among market analysts. CBRE proclaims Europe is "poised for a new boom" driven by surging overseas capital, while MSCI reports market "stagnation" with investment volumes down 7%. Who's more likely to be right? For institutional investors, this split signals that successful deployment now depends more on granular intelligence than consensus following.

The contradiction runs deep. CBRE identifies clear recovery: overseas investors increased European allocations by 20% in H1 2025, while European investors deployed 13% more capital. US private equity funds spent 25% above normal levels. Property values responded with high-quality buildings gaining 5-10% and prime offices up 13% since end-2023.

MSCI tells a different story. European commercial real estate investment totaled €91.7 billion in H1 2025, down 7% from 2024. The second quarter fell 10% to €46.2 billion. "The uncertainty that followed the announcement of US tariffs in April naturally led some investors to pause their real estate transactions while they waited for clarity," explains Tom Leahy, Head of EMEA Real Assets Research at MSCI.

Germany is an exception

Both houses agree on one point: Germany outperformed. Investment rose 15% to €16.5 billion, making it Europe's second-largest market behind the UK's €26.2 billion. Berlin ranked third among European cities with €2.8 billion in transactions, Frankfurt fifth after a €1.4 billion data center deal between MEAG and Singapore's GIC.

Yet even Germany shows sector weakness. MSCI reports office transactions 70% below the ten-year average, though some analysts believe prices may have bottomed out. The contradiction persists: CBRE highlights office value gains while MSCI emphasizes transaction collapse.

CBRE emphasizes structural drivers: "The improved financing environment, rising transaction activity and investor interest in key asset classes point to a noticeable recovery in the second half of the year." The firm sees strength in data centers benefiting from AI applications, hotels driven by tourism recovery, and European residential markets facing undersupply of nearly ten million homes.

MSCI acknowledges positives while staying cautious. "Falling interest rates are having a positive effect on pricing, and certain rental markets have performed robustly," notes Leahy. "Some office market segments are also recovering." But geopolitical uncertainties and trade policy concerns continue dampening confidence.

Both expect improved second-half performance for different reasons. CBRE anticipates returning confidence as "some investors are expressing explicitly positive sentiment towards Europe." MSCI points to the highest pipeline of pending transactions in three years as evidence of gradual recovery.

Implications for investors

The analytical divide is creating specific challenges for institutional decision-making. CBRE's optimism (they ARE brokers, after all) rests on actual capital flows, that is, money moving into European markets from overseas sources seeking value. MSCI's pessimism reflects transaction volume weakness and macroeconomic uncertainty.

When major research houses disagree fundamentally using similar data, successful investing becomes more about reading between conflicting narratives rather than following expert consensus. The German market exemplifies this complexity: strong overall growth (+15%) alongside severe office sector weakness (-70%). For institutional investors, this analytical divergence creates both challenge and opportunity, forcing more selective, informed decision-making in a market where consensus no longer exists.