European Market Report Q3 2026

Market overview by Dils Team Research

European Market Report Q3 2026 Market Overview Total investment across the monitored countries reached €118 billion in the first nine months of 2026, marking a 21% year-on-year increase, in line with the growth recorded in the first half. Despite some divergence in Q3 performance at country level, growth over the January-September period was broad-based, with Germany the sole market recording a slight year-on-year decrease in investment volume (-3%). Every other market posted a rise, ranging from +6% in Portugal to +36% in the Netherlands, while Italy and Spain registered their highest-ever performance for the period, confirming the positive momentum of Southern European markets. After a weak start to the year, the French market partially recovered thanks to the impact of several large-size transactions, which drove volumes in Q2 and Q3. Investment growth remains broad-based across asset classes. Alternatives recorded the strongest year-on-year increase (+68%), largely driven by robust activity in the UK healthcare sector. Logistics also posted significant growth, while office investment volumes were supported by a strong Q3 performance in France, offsetting weaker activity in other markets. Meanwhile, the living sector continued to gain market share in Spain, Italy and the Netherlands. Retail was the only asset class to record broadly stable investment volumes, as subdued activity in Germany was counterbalanced by stronger performances across other European markets, particularly in Southern Europe. The heightened tension in international relations and financial markets, clearly reflected in the rise of national bond yields in September 2026, is weighing on real estate investor confidence. A decompression of real estate yields emerged in Q3 2026, with moderate increases already recorded locally and a broader outlook pointing to further rises across most markets. This dynamic reflects the combined effect of a tighter financial environment, growing competition for capital amid elevated AI- and State-driven demand, and persistent uncertainty tied to upcoming elections in several major European countries, including Spain, France and Italy. Together, these factors are pushing investors toward a more cautious stance, despite otherwise solid market fundamentals. Occupier demand in Q3 2026 remained firmly concentrated on prime, ESG-compliant office assets, with flight-to-quality dynamics increasingly visible across European markets. Scarcity of top-tier space in central locations, from Germany to Italy, continued to fuel prime rental growth, while large occupier moves, notably in tech, reinforced demand for well-located, high-specification buildings in Amsterdam. Overall leasing activity stayed selective amid macroeconomic and geopolitical uncertainty, yet prime assets sustained healthy momentum and rental resilience. Secondary stock, by contrast, faces growing obsolescence risk and softer demand. Leasing activity across European logistics markets gained further traction in the third quarter, with occupier demand moving beyond stabilisation into actual re-acceleration in the largest geographies. Germany posted its strongest quarterly result since Q2 2022, while Italy delivered a record nine-month performance; France and the Netherlands both extended their recovery. Demand increasingly originated outside traditional hubs, with logistics providers emerging as a common thread across markets, often sustained by e-commerce demand and by the defense sector in Germany. Q3 2026 was also marked by the increasing centrality of housing affordability as a political issue across Europe, with notable flashpoints in cities like Madrid, where large protests took place, and Berlin, where the local government is considering new strategies to address the issue. Nevertheless, price pressure has been a recurring feature in most European markets in recent years, with metropolitan areas at the centre of this dynamic. Transaction volumes differ across the monitored cities, with the Iberian capitals emerging as the markets showing a more pronounced slowdown, while Paris, Milan and Rome all recorded a slight increase in transaction numbers.