Europe’s largest real estate exhibition, EXPO REAL, returned to Munich in October 2025. From October 6 to 8, IGIS Europe participated in the event to observe firsthand the key issues shaping the global property market and the evolving sentiment among industry participants.

This year’s EXPO REAL opened under a crisp autumn sky and intermittent rain—an apt reflection of the current tone of the European real estate market. The Messe München convention center was noticeably livelier than last year, welcoming around 40,000 participants according to the organizers. However, exhibitor booths were visibly smaller, quietly underscoring the persistent challenges of recent years.

Only seven exhibition halls were in operation, with over half of one hall dedicated to PropTech and technology-driven exhibitors, illustrating how rapidly innovation is reshaping the traditional property sector.

Signs of Recovery Amid Lingering Uncertainty

While policy rates across Europe and the UK began easing earlier this year, all-in interest levels remain elevated compared to pre-2022 levels. Combined with slower economic growth, rising construction costs, and ongoing global uncertainty, these factors continue to weigh on the market.

On-site discussions revealed cautious optimism—many voiced that the market “may have hit the bottom,” yet most agreed it is still too early to interpret this as a clear signal of recovery or renewed investment momentum.

Equity investments remain constrained, with signs of capital reallocation even out of previously favored sectors such as Build-to-Rent (BtR) and logistics. Although BtR assets are viewed as stable, investors increasingly question whether a 5–6% IRR justifies development risk (Note: Are development returns really this low? Project-level surely should be higher?). Meanwhile, concerns about potential oversupply and rental adjustments have made logistics investors more cautious.

In contrast, credit investments continue to show available liquidity, but viable deal flow remains limited. The most active participants were loan restructuring advisors, one of whom displayed several pages of ongoing projects—“a reflection of where the real activity lies in today’s market.” Many global managers shared the view that, despite expectations of recovery, even the largest firms are likely to maintain a conservative stance for the foreseeable future.

Policy, Sustainability, and Digital Transformation Take Center Stage

This year’s discussions were driven less by dealmaking and more by policy, sustainability (ESG), and digital transformation.

In the residential sector, the chronic housing shortage across Europe and the need for affordable housing were central themes. Local governments called for greater public responsibility and expansion of affordable housing, while investors voiced skepticism toward approaches that overlook profitability. Complex permitting procedures and slow regulatory reforms were also cited as significant obstacles to market entry.

Sustainability is no longer a supplementary consideration but a core prerequisite for both developers and investors. Energy efficiency, carbon reduction, use of sustainable materials, and circular economy principles are increasingly embedded in asset valuation. Properties that demonstrate these characteristics are commanding premium rents and stronger market recognition.

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Interest in PropTech and AI-driven solutions was also at an all-time high. Nearly an entire exhibition hall was dedicated to PropTech firms showcasing smart building management, energy optimization platforms, and automated ESG reporting systems—signaling that technology-driven innovation is finally taking root across the real estate industry.

Strategic Realignment Among European Managers

A notable trend at EXPO REAL 2025 was the wave of M&A and strategic alliances among European asset managers seeking to counterbalance the growing influence of large U.S. firms such as Blackstone, KKR, Starwood, BGO, TPG, and Ares.

For instance, BNP Paribas strengthened its alternative investment capabilities by acquiring AXA IM, while Generali Investments and Natixis Investment Managers were in discussions to form a €1.9 trillion joint venture.

Industry participants widely agreed on one point:

“In today’s environment, only the mega-managers—or those with deep specialization in specific sectors and strategies—will thrive.”

As a result, mid-sized generalist managers are seeing their relevance gradually diminish, while the strategic choice between scale and specialization is becoming increasingly decisive.

Shifting Investor Focus Across Asset Classes

Distinct shifts in investor sentiment were evident across asset classes this year:

Residential / Build-to-Rent — Demand remains resilient amid urbanization and demographic shifts, yet construction cost inflation and permitting delays continue to weigh on development. Investors acknowledge long-term growth potential but are slowing deployment in the near term.
Logistics & Industrial — Following years of rapid expansion, the sector has entered a period of recalibration. However, rising acquisitions by Chinese firms and the expansion of Europe’s defense industry are introducing new dynamics, warranting close monitoring.
Data Centers — Driven by the growth of AI and cloud computing, the sector continues to attract strong investor interest. Yet, constraints around power supply and land approvals remain substantial barriers to entry. In particular, energy infrastructure challenges—exacerbated since the Russia–Ukraine war—are now a structural issue across Europe.
Senior Living & Healthcare Real Estate — Accelerating demographic change is reinforcing this sector’s long-term growth narrative. Nonetheless, operator availability and modest yields remain key hurdles, prompting investors to approach it as a portfolio diversification play rather than a short-term return strategy.
Retail Parks & Supermarkets — Retail assets, once overlooked, are seeing a measured resurgence. Grocery-anchored retail parks, having corrected in value post-COVID, are appealing to investors seeking stable 7–9% yields. Proximity to residential areas and conversion potential for last-mile logistics or low-density housing add further appeal.
Office — Opinions remain divided. While some investors remain cautious amid ongoing uncertainty, others consider the current market a window of opportunity. There is, however, a broad consensus that an office’s value now hinges on its location, quality, and adaptability. Redeveloping B-grade assets into A-grade offices is widely viewed as one of the few actionable opportunities in this cycle.

A Market Searching for Stability Amid Easing Conditions

For the remainder of 2025, a cautious investment stance is expected to persist. Although transaction volumes across Europe are showing tentative signs of recovery, elevated interest rates and financing costs continue to constrain activity.

However, expectations for a more accommodative monetary policy and potential rate cuts are gradually lifting sentiment. Many anticipate that 2026 could mark the beginning of renewed transaction momentum and asset repricing.

In the coming years, the market’s focus is likely to shift from rapid recovery to quality recovery—prioritizing resilience and sustainability over speed.

Investors are increasingly favoring strategies that enhance the value of existing assets through urban regeneration, renovation, and ESG integration, while repurposing and reconfiguring current stock is emerging as a more pragmatic alternative to new development.

By Sungeok (David) Chang, Head of IGIS Europe

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