Dils European Market Report Q1 2026

The European commercial real estate market opens 2026 with tangible signs of recovery. In the first quarter, according to analysis by Dils’ Research Team, investment across the monitored countries reached €38.5 billion, up 16% year-on-year, outlining a steadily strengthening picture, although still uneven across different markets.

Overall, total investment across the monitored countries reached €38.5 billion in Q1 2026, marking a 16% year on year increase and signaling a gradual, albeit uneven, recovery in European real estate investment activity. Spain stood out with €6.4 billion invested during the quarter, posting a strong 53% year on year increase and confirming its position as one of the most dynamic markets in Europe. Nevertheless, the Netherlands recorded the highest annual growth rate (+59%), supported by a solid €4.1 billion invested in Q1 2026, with the living sector acting as the main driver.

Other markets delivering a robust start to the year included Portugal (€0.9 billion, +37%) and the UK, which attracted €12.5 billion of investment, up 25% year on year. By contrast, Italy and Germany closed the quarter with positive but broadly stable volumes, at €2.8 billion (in line with last year) and €8.9 billion (+5%), respectively. France was the only country to record a weaker performance, with investment volumes declining to €3.1 billion ( 35% year on year), as investors remained cautious amid limited economic momentum and heightened uncertainty surrounding national accounts.

From a sector perspective, living and alternatives emerged as the strongest performers of the quarter, driven primarily by robust activity in the Spanish and Dutch living markets and by solid investment volumes in the German alternatives sector. Within healthcare, investment activity was significantly influenced by the acquisition of Cofinimmo by Aedifica, which boosted volumes across several European markets. The office sector continued to show early signs of a gradual recovery, with investment volumes up 15% year on year overall, albeit with markedly uneven trends at the local level. By contrast, retail, hospitality and logistics recorded weaker performances compared with the previous year, reflecting a more cautious investor stance toward these sectors in the current market environment.

Against a backdrop of heightened geopolitical uncertainty, Europe is increasingly perceived as a relatively stable and attractive investment destination. However, inflationary pressures are expected to re emerge in the coming quarters, driven by disruptions to the global energy supply chain linked to the Hormuz crisis. This may prompt a renewed tightening in monetary policy and exert upward pressure on interest rates. While prime net yields across European real estate markets remained broadly stable in Q1, the fast evolving international environment suggests a stable to slightly upward yield trajectory in the near term.

Occupier markets in Q1 2026 remained selective but broadly supportive across Europe. In offices, demand continued to focus on prime, ESG compliant space in CBDs and the best-connected submarkets, sustaining rental growth for high quality assets despite still uneven leasing performance across cities. In logistics, occupier activity proved resilient, with take up gradually recovering and demand concentrating on modern facilities, while muted development pipelines continued to support rental levels. However, across both sectors, occupiers remained cautious, with decision making shaped by cost discipline, longer negotiation processes and persistent geopolitical uncertainty.

Residential markets continued to benefit from the easing in financing conditions triggered by the 2024 rate cuts, although by late 2025 and early 2026 mortgage costs had largely stopped falling and moved into a phase of broad stabilisation. House prices continued to rise across most of the cities monitored confirming resilient demand against a still constrained supply.