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U.S.Retail Market:Conditions&Trends2Q25Reach out to your Newmark contact for the extended reportNEWMARK2Access the Extended 2Q25 U.S.Retail Market:Conditions&Trends ReportThe extended version of this report includes:Up-to-Date Narrative on Tariff Policy:Commentary is provided on how the ever-changing tariff situation is affecting consumers,occupiers,and investors.How the Retail CRE Industry has Balanced Supply and Demand:The retail sector is insulated from short-term disruption due to decades of property cultivated supply.Retail Space Productivity:Sales per square feet have soared,suggesting theres more room for growth in asking rents.Retail CRE Detail by Format and Age:A case could be made that retail needs more new supply than ever,as newer space vastly outperforms older space.Extensive content across 40 slidesa detailed presentation packed with useful retail information and in-depth analysis.To access,please reach out to Brandon.I or your Newmark contact.3Market ObservationsOutlookNet absorption is expected to remain negative through year-end 2025,as retailers continue to recalibrate store footprints for greater efficiency,often by closing locations in subprime areas.Asking rents are projected to grow 1.9%in 2025,with a modest deceleration to 1.8%in 2026 under the base case.In a moderate downside scenario,rent growth will remain slow through 2025 and 2026,decline in 2027,and return to growth in 2028.Economic Conditions&Retail Demand DriversConsumer sentiment rose in June.Still,overall sentiment remains tempered by future expectations,which have declined 17%since June 2024.Wage growth has slowed but continues to outpace inflation by more than 140 basis points.Inflation has eased.Retail sales growth has moderated as consumers remain cautious amid ongoing economic uncertainty.Imports are expected to rise in July,according to the Global Port Tracker via NRF,as retailers prepare for the 2025 Holiday Season.However,volumes are projected to fall below trend in later monthssignaling a potential shortfall in goods.Leasing Market FundamentalsNet absorption was negative in 2Q25,indicating that 2025 may echo 2020,the last year to record consecutive quarters of negative net absorption.As retailers close underperforming locations and others restructure through bankruptcy,2025 is emerging as a transitional period for retail assets.Despite these shifts,overall retail fundamentals remain largely intact.The availability rate rose 10 basis points to 5.3%but remains well below the long-term average of 6.6%.Asking rents recorded their first year-over-year decline as subprime space enters the market.Retail space continues to perform strongly,with sales per SF up 4.2%year-over-year and 45ove 2019 levels.Capital MarketsRetail investment sale volume in 2Q25 rose 22%year-over-year,keeping the 12-month rolling volume up 4%year-over-year.Pricing and cap rates remain relatively stable.The uptick in$100 million-plus individual property sales signals growing interest,which could drive higher volume by year-end 2025 and into 2026.Retail values continue to rise in 2025,posting positive gains month-over-month,over the past three months and year-over-year,the only property type to show growth across all three timeframes.NEWMARK1.Economic Conditions&Demand Drivers2.Leasing Market Fundamentals3.Capital MarketsTABLE OF CONTENTS449281Q25Economic Conditions&Demand DriversNEWMARKChart Title6Based on the Consumer Price Index for All Urban Consumers:All Items,and the Average Hourly Earnings of All Private Employees CPI for 2Q 2025 is based on an average of year-over-year growth for April and May.Source:U.S.Bureau of Labor Statistics,July 2025.Wage growth has outpaced inflation for nine consecutive quarters,with the gap continuing to widen.The current 142-basis-point spread is the largest since 1Q21.Wage Growth Increasing Spread CPI GrowthWages vs.Inflation,in Year-over-Year Growth-400-2000200400600800-1%0%1%2%3%4%5%6%7%8%9%1Q 20152Q 20153Q 20154Q 20151Q 20162Q 20163Q 20164Q 20161Q 20172Q 20173Q 20174Q 20171Q 20182Q 20183Q 20184Q 20181Q 20192Q 20193Q 20194Q 20191Q 20202Q 20203Q 20204Q 20201Q 20212Q 20213Q 20214Q 20211Q 20222Q 20223Q 20224Q 20221Q 20232Q 20233Q 20234Q 20231Q 20242Q 20243Q 20244Q 20241Q 20252Q 2025BPS DifferenceAverage Hourly Earnings,%ChangeCPI,%ChangeNEWMARK7Source:University of Michigan,July 2025.Consumer sentiment finally improved,breaking a downward trend that had persisted since the start of 2025.However,overall sentiment remains down approximately 11%compared to June 2024.The primary drag continues to be the expected conditions index,reflecting respondents outlook on their financial situation over the next 12 months,which is down nearly 17%year-over-year.Despite Tariff Uncertainty,Consumer Sentiment Improves in JuneConsumer Confidence Index Current Economic Conditions101.0 50.0 60.7 -20 40 60 80 100 120Jan-15Apr-15Jul-15Oct-15Jan-16Apr-16Jul-16Oct-16Jan-17Apr-17Jul-17Oct-17Jan-18Apr-18Jul-18Oct-18Jan-19Apr-19Jul-19Oct-19Jan-20Apr-20Jul-20Oct-20Jan-21Apr-21Jul-21Oct-21Jan-22Apr-22Jul-22Oct-22Jan-23Apr-23Jul-23Oct-23Jan-24Apr-24Jul-24Oct-24Jan-25Apr-25NEWMARK8On a month-over-month basis,total retail and food services sales rose 0.6%in June and are up 4.1%year-over-year.The monthly gain exceeded the Bloomberg analyst forecast by 50 basis points,highlighting how retail continues to outperform expectations.Year-over-year gains in retail sales over the past three quarters have also outpaced CPI growth.Categories such as miscellaneous retail and health and personal care remain strong.Gasoline stations continue to show year-over-year declines,largely driven by price deflation.Retail Sales Continue to Surprise AnalystsU.S.Retail and Food Services and CPI,in%Change Year-over-YearU.S.Retail and Food Services by Category,in%ChangeSource:University of Michigan,July 2025.-4.4%-1.1%-0.2%1.6%2.7%3.2%3.9%3.9%4.1%4.5%4.5%6.5%6.6%8.3%8.5%-10%-5%0%5%Gasoline StationsBuilding Materials Garden SupplyElectronics Appliance StoresSports Hobby Music BooksGrocery StoresGeneral MerchandiseClothing AccessoriesTotal Retail Food ServicesTotal Retail Food Services Excl Auto Parts GasNonstore RetailFurniture Home FurnishingsMotor Vehicles Parts DealersFood Services Drinking PlacesHealth Personal CareMiscellaneous RetailYear-over-YearMonth-over-Month5.0%1.8%3.4%3.9%1.8%2.6%2.3%3.9%4.5%4.1%0%1%2%3%4%5%6%7%1Q 20232Q 20233Q 20234Q 20231Q 20242Q 20243Q 20244Q 20241Q 20252Q 2025Retail Food ServicesCPINEWMARK1Q25Leasing Market FundamentalsNEWMARK10Considers all retail properties 20,000 sq.ft.and higher.Source:CoStar,2Q 2025.2Q 2025 retail leasing volume fell to 31.7 million SF,marking a year-over-year decline of nearly 29%and sitting approximately 23low the long-term average.Contributing factors may include a shrinking supply of prime retail space suited to an evolving industry,as well as tariff uncertainty prompting some retailers to pause expansion plans.Conversely,some value-oriented retailers are viewing the uncertainty as an opportunity to grow.Retail Volume Continues to Decline as Scarcity of Prime Space RemainsQuarterly Leasing Activity vs.Ten Year Average for Retail CRE31.7 39.2 01020304050601Q 20142Q 20143Q 20144Q 20141Q 20152Q 20153Q 20154Q 20151Q 20162Q 20163Q 20164Q 20161Q 20172Q 20173Q 20174Q 20171Q 20182Q 20183Q 20184Q 20181Q 20192Q 20193Q 20194Q 20191Q 20202Q 20203Q 20204Q 20201Q 20212Q 20213Q 20214Q 20211Q 20222Q 20223Q 20224Q 20221Q 20232Q 20233Q 20234Q 20231Q 20242Q 20243Q 20244Q 20241Q 20252Q 2025Millions of SFTotal Leasing ActivityAverage Leasing ActivityNEWMARK11Considers all retail properties 20,000 sq.ft.and higher.Source:CoStar,2Q 2025.Even as retail lease volume declines,deliveries of new retail space totaled just 6.98 million SF in 2Q 2025,a new low dating back to at least 2000.This sustained trend of limited new development has helped cushion fundamentals from the impact of reduced leasing demand.With fewer than 10 million SF in the development pipeline,leasing volume is expected to continue outpacing completions well into the future.Deliveries Remain Low,Keeping Retail Fundamentals in BalanceQuarterly Leasing Activity vs.Ten Year Average for Retail CRE0204060801001202Q 20064Q 20062Q 20074Q 20072Q 20084Q 20082Q 20094Q 20092Q 20104Q 20102Q 20114Q 20112Q 20124Q 20122Q 20134Q 20132Q 20144Q 20142Q 20154Q 20152Q 20164Q 20162Q 20174Q 20172Q 20184Q 20182Q 20194Q 20192Q 20204Q 20202Q 20214Q 20212Q 20224Q 20222Q 20234Q 20232Q 20244Q 20242Q 2025Millions of SFDeliveries SFLeasing Activity SF TotalNEWMARK12Considers all retail properties 20,000 sq.ft.and higher.Source:CoStar,2Q 2025.As expected,net absorption for U.S.retail assets was negative in 2Q25,as store closures outpaced leasing activity.In addition to high-profile bankruptcies such as Joann,Rite Aid and Forever 21,retail centers are navigating tenant strategies that include trimming store fleets,targeting underperforming locations or those misaligned with evolving supply chain priorities.Looking ahead,absorption is expected to remain negative through year-end 2025 and into 2026.Net Absorption is Negative For Second Consecutive QuarterRetail Net Absorption by Quarter(30)(20)(10)0102030401Q 20182Q 20183Q 20184Q 20181Q 20192Q 20193Q 20194Q 20191Q 20202Q 20203Q 20204Q 20201Q 20212Q 20213Q 20214Q 20211Q 20222Q 20223Q 20224Q 20221Q 20232Q 20233Q 20234Q 20231Q 20242Q 20243Q 20244Q 20241Q 20252Q 20253Q 2025F4Q 2025F1Q 2026F2Q 2026F3Q 2026F4Q 2026FMillions of FNEWMARK13Considers all retail properties 20,000 sq.ft.and higher.Source:CoStar,2Q 2025.Retail availability rose to 5.3%,up 10 basis points quarter-over-quarter and 30 basis points year-over-year.Despite the increase,the availability rate remains well below the long-term average of 6.6%.Retail Availability Ticks up Again,Yet Remains Significantly Below AverageHistorical Availability for Retail CRE,All Formats5.3%6.6%4.0%4.5%5.0%5.5%6.0%6.5%7.0%7.5%1Q 20182Q 20183Q 20184Q 20181Q 20192Q 20193Q 20194Q 20191Q 20202Q 20203Q 20204Q 20201Q 20212Q 20213Q 20214Q 20211Q 20222Q 20223Q 20224Q 20221Q 20232Q 20233Q 20234Q 20231Q 20242Q 20243Q 20244Q 20241Q 20252Q 2025NEWMARKRetail fundamentals,which remained stable throughout the pandemic,are expected to stay steady amid tariff uncertainty,as the retail footprint has been pruned by demolitions of underperforming and obsolete space and replaced by a responsible level of new supply.14NEWMARK15Smaller markets such as Raleigh and Albany remain the tightest in availability,with larger markets like Boston,Minneapolis and Seattle also ranking among the top 15.In terms of 12-month absorption totals,Texas stands out with three markets in the top five and San Antonio close behind at number six.Smaller markets including Grand Rapids,Michigan,and the Lehigh Valley in Pennsylvania also secured spots in the top 15.Top 15 U.S.Markets in Retail Availability and 12-Month Absorption TotalTop 15 Markets in Availability,2Q 2025Top 15 Markets in Net Absorption,12-Month TotalConsiders all retail markets with over 50 million sq.ft.of retail inventory.Source:CoStar,2Q 2025.3.6%3.6%3.5%3.5%3.5%3.4%3.4%3.4%3.4%3.3%3.1%3.0%3.0%2.9%2.6%2.0%2.2%2.4%2.6%2.8%3.0%3.2%3.4%3.6%3.8%MilwaukeeTulsaGrand RapidsSeattleCharlotteMinneapolisOmahaAlbuquerqueLouisvilleEl PasoNashvilleBostonKnoxvilleAlbanyRaleigh358,843369,923374,937388,145428,250460,154462,254600,213603,083665,962674,6321,026,0381,278,8301,601,0131,641,2560500,0001,000,0001,500,0002,000,000Lehigh Valley PAGrand RapidsJacksonvilleTulsaEast Bay CAIndianapolisRaleighNorfolkNew YorkSan AntonioLas VegasPhoenixAustinHoustonDallas-Fort WorthNEWMARK16Considers all retail properties 20,000 sq.ft.and higher.Source:CoStar,2Q 2025.Both freestanding retail and power centers continue to maintain above-average occupancy rates,while neighborhood,community and strip centers trail slightly at 93.5%.The malls,lifestyle centers and outlets segment remains weighed down by subprime mall product,space that is unlikely to recover lost tenants who either relocate to better-managed centers or exit the market entirely.Occupancy Declines Across All Retail FormatsHistorical Occupancy for Retail CRE,by Format98.4.5.3.40%2Q 20153Q 20154Q 20151Q 20162Q 20163Q 20164Q 20161Q 20172Q 20173Q 20174Q 20171Q 20182Q 20183Q 20184Q 20181Q 20192Q 20193Q 20194Q 20191Q 20202Q 20203Q 20204Q 20201Q 20212Q 20213Q 20214Q 20211Q 20222Q 20223Q 20224Q 20221Q 20232Q 20233Q 20234Q 20231Q 20242Q 20243Q 20244Q 20241Q 20252Q 2025Total RetailFreestandingNCSPowerMall-Life-OutletNEWMARK17Although quarter-over-quarter asking rent growth was slightly positive,year-over-year rents declined.A closer look reveals that asking rents are being anchored by a growing share of subprime space.More than 250 million SF of retail space has been on the market for two years or moreaccounting for roughly 45%of total availability.Asking Rents Fall on a Year-over-Year Basis for the First Time in A DecadeAsking Retail CRE Direct Rent,$/SF/NNNAsking Retail CRE Rent,in%ChangeConsiders all retail properties 20,000 sq.ft.and higher.Source:CoStar,2Q 2025.$10$11$12$13$14$15$16$172Q 20154Q 20152Q 20164Q 20162Q 20174Q 20172Q 20184Q 20182Q 20194Q 20192Q 20204Q 20202Q 20214Q 20212Q 20224Q 20222Q 20234Q 20232Q 20244Q 20242Q 2025-1%0%1%2%3%4%5%6%7%2Q 20154Q 20152Q 20164Q 20162Q 20174Q 20172Q 20184Q 20182Q 20194Q 20192Q 20204Q 20202Q 20214Q 20212Q 20224Q 20222Q 20234Q 20232Q 20244Q 20242Q 2025Quarter-over-QuarterYear-over-YearNEWMARKThe productivity of retail space continues to rise,with sales per SF up 45%compared to 2019,outpacing inflation by more than 20 percentage points.This growth has also exceeded the pace of asking rent increases,suggesting room for further rent growth.18NEWMARK19Occupancy for retail assets built before 2000 has declined by more than 50 basis points since 2008,while assets delivered in 2000 or later have seen occupancy rise by 157 basis points.Retail absorption in 2025 would be positive if not for the drag from older properties.With limited new development in the pipeline,this dynamic is likely to persist until older assets are redeveloped,reimagined,or at minimum,demolished.Retail Occupiers Show Clear Preference For Newer AssetsOccupancy by Age,U.S.Retail AssetsNet Absorption by Age,U.S.Retail Assets,in Millions of Square FeetConsiders all retail markets with over 50 million sq.ft.of retail inventory.Source:CoStar,2Q 2025.89%1Q 20083Q 20081Q 20093Q 20091Q 20103Q 20101Q 20113Q 20111Q 20123Q 20121Q 20133Q 20131Q 20143Q 20141Q 20153Q 20151Q 20163Q 20161Q 20173Q 20171Q 20183Q 20181Q 20193Q 20191Q 20203Q 20201Q 20213Q 20211Q 20223Q 20221Q 20233Q 20231Q 20243Q 20241Q 20251999 and Older2000 and Newer(30)(20)(10)-10 20 30 401Q 20192Q 20193Q 20194Q 20191Q 20202Q 20203Q 20204Q 20201Q 20212Q 20213Q 20214Q 20211Q 20222Q 20223Q 20224Q 20221Q 20232Q 20233Q 20234Q 20231Q 20242Q 20243Q 20244Q 20241Q 20252Q 2025 1999 and Older 2000 and NewerNEWMARKThe retail community has been diligent in demolishing older,non-competitive assets.Now,its time for voices to advocate for new,responsible development and re-development.20NEWMARK21Source:CoStar,2Q 2025.The outlook for asking retail rents has seen a slight quarter-over-quarter calming.The base case remains unchanged,with rents projected to rise 1.8%.However,the previous outlook for 2027 has softened from a 2.7%gain in 1Q to a repeat gain of 1.8%.The moderate downside scenario has improved,shifting from a projected-1cline in 2026 to a 0.6%increase,with the decline now expected in 2027.In the moderate upside scenario,rents are forecast to rise 2.5%in 2026 and 3.4%in 2027.Rent Outlook Remains Positive Despite Calming EffectRetail Rent Growth Forecast by Economic Scenario-2%-1%0%1%2%3%4%5 152016201720182019202020212022202320242025202620272028Base CaseModerate UpsideModerate DownsideNEWMARK1Q25Capital MarketsNEWMARKChart Title23Source:MSCI Real Capital Analytics,July 2025.Strong February and June investment sales volumes have positioned 2025 for a solid start compared with previous years.Year-to-date,retail investment sales volume is over 10%higher than the same period in 2024.With more significant,big-ticket retail centers coming to market,the year could also close on a strong note.2025 Retail Investment Volume Ahead of 2023 and 2024Investment Volume for Retail CRE$-$10$20$30$40$50$60$70$80$90$100JFMAMJJASONDBillions of$20212022202320242025NEWMARKChart Title24Source:MSCI Real Capital Analytics,July 2025.The average price per SF for retail assets rose 3.9%quarter-over-quarter,bringing it up 2.7%year-over-year.While more prime-level assets have traded,so have lower-tier properties,with the bottom quartile price per SF falling 6.7%quarter-over-quarter,likely driven by Class C mall activity.Price Per SF For Retail Assets Remains Stable Price Per SF for Retail CRE$-$50$100$150$200$250$300$350$400$450$5001Q 20152Q 20153Q 20154Q 20151Q 20162Q 20163Q 20164Q 20161Q 20172Q 20173Q 20174Q 20171Q 20182Q 20183Q 20184Q 20181Q 20192Q 20193Q 20194Q 20191Q 20202Q 20203Q 20204Q 20201Q 20212Q 20213Q 20214Q 20211Q 20222Q 20223Q 20224Q 20221Q 20232Q 20233Q 20234Q 20231Q 20242Q 20243Q 20244Q 20241Q 20252Q 2025Top Quartile$/SFMedian$/SFBottom Quartile$/SFAverage$/SFNEWMARKChart Title25Prime grocery-anchored assets refer to trades of grocery-anchored retail centers at$200/SF or higher.Source:MSCI Real Capital Analytics,July 2025.Cap rates were more of a mixed bag,with bottom quartile cap rates falling 20 basis points quarter-over-quarter and top quartile cap rates down 10 basis points.As a result,average cap rates remained essentially flat,as did cap rates for prime grocery-anchored assets.Prime Grocery-Anchored and Top-Quartile Cap Rates Remain LevelCap Rates for Retail CRE4.0%4.5%5.0%5.5%6.0%6.5%7.0%7.5%8.0%8.5%1Q 20152Q 20153Q 20154Q 20151Q 20162Q 20163Q 20164Q 20161Q 20172Q 20173Q 20174Q 20171Q 20182Q 20183Q 20184Q 20181Q 20192Q 20193Q 20194Q 20191Q 20202Q 20203Q 20204Q 20201Q 20212Q 20213Q 20214Q 20211Q 20222Q 20223Q 20224Q 20221Q 20232Q 20233Q 20234Q 20231Q 20242Q 20243Q 20244Q 20241Q 20252Q 2025Bottom Quartile Cap RateTop Quartile Cap RateAverage Cap RateAverage Cap Rate:Prime Grocery-AnchoredNEWMARK26Source:CoStar,July 2025.On a year-over-year basis,sale price per SF rose by nearly$25 for malls,lifestyle centers and outlets,while power centers saw an increase of almost$30/SF.Malls,lifestyle centers and outlets also experienced a notable rise in average cap rates,likely due to the trading of subprime assets.Cap rates for neighborhood,community and strip centers remained relatively flat,as did those for power centers.Price Per Square Foot Rises For Malls and Power Centers,Caps are Largely Flat Cap Rates for Retail CRE$124$158$171$149$153$201 8.74 7.70 7.64 15.51 7.52 7.65$-$50$100$150$200$250-5 10 15 20Mall-Lifestyle-OutletNCSPower CenterMall-Lifestyle-OutletNCSPower Center2Q 20242Q 2025Average$/SFAverage Cap Rate(%)Average$/SF Average Cap RateNEWMARKREITs account for 34%of large-transaction activity in 2025,up from just 12%in 2024.27NEWMARKChart Title28Source:MSCI Real Capital Analytics,June 2025.According to the RCA CPPI index,retail CRE values rose 3.5%year-over-year as of June 2025the highest increase among all property types.Values also posted slight gains on a three-month basis and were stable on a one-month basis.Industrial CRE is the only other property type to manage positive or stable values across all time frames.Retail Leads CRE Values Index GrowthMSCI RCA CPPI Index3.5%1.6%0.1%-0.9%-2.1%-4.2%0.1%0.5%-0.2%-0.2%-1.0%-0.6%0.0%0.3%0.0%0.0%-0.6%-0.1%-5%-4%-3%-2%-1%0%1%2%3%4%RetailIndustrialApartmentCore CommercialOffice-SuburbanOffice-CBD1-Year3-Month1-MonthFor more information: Isner DirectorRetail ResearchBHeadquarters125 Park Ave.New York,NY 10017t 212-372-Cleveland1300 East 9th StreetDavid BitnerExecutive Managing Director Newmark ResearchDSan Francisco655 Montgomery Street
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2025 North American Industrial Outlook2NEWMARK1 Statistically tracked inventory2 North America is a .
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U.S.investment sales reportH1 2025Page 2U.S.Capital Markets Group|U.S.investment sales report Source:Avison Young Market Intelligence,Real Capital AnalyticsU.S.investment sales reportH1 2025$456B$577B$399B$757B$648B$368B$391B$365B$0$200$400$600$80020182019202020212022202320242025(Annualized)MultifamilyDevelopmentIndustrialOfficeRetailTotal U.S.dollar volume by asset classBillions29,944 33,260 25,988 42,462 38,516 24,828 25,167 24,916 010,00020,00030,00040,00050,00020182019202020212022202320242025(Annualized)MultifamilyDevelopmentIndustrialOfficeRetailNumber of sales by asset class#of sales$13.5B$8.6B$7.5B$6.3B$5.9B$5.2B$4.8B$4.1B$3.4B$3.1B$3.0B$2.3B536469 480 591 342 198 405 296192 189 103 160 0100200300400500600$0$2$4$6$8$10$12$14$16BillionsTop 12 volume and sales by market H1 2025Dollar Volume#of SalesTop 12 MarketsVolumeSale CountH1 2025$67.7B3,961Change from H1 20248.9.2%U.S.investment salesAccounting for 37.1%of total dollar volume in the first half of the year,the top 12 markets continue to be primary drivers of the U.S.investment sales market.This report provides a snapshot for each of those 12 markets.The overall U.S.investment sales market recorded 12,458 transactions valued at$182.4 billion in total dollar volume in the first half of the year.When compared to H1 2024,there was a 15.2%and 25.2%increase,respectively.When annualizing the first half of this year,2025 is on pace to see a 1.0crease in sales and 6.6crease in volume compared to 2024.Much like in 2024,there is a prevailing sense of optimism that the latter half of the year will witness a rise in trading volumes,driven by an improvement in investor confidence.Top 12 investment sales markets Page 3 U.S.Capital Markets Group|U.S.investment sales report Source:Avison Young Market Intelligence,Real Capital AnalyticsDFWs investment sales market significantly improved in H1 2025 with 536 transactions totaling$13.5 billion across all asset types,an 89.0%increase year-over-year.Multifamily and development sites drove this surge.Except for industrial,sales activity rose across all asset types,signaling stronger investor confidence.Retail exhibits relative strength,while multifamily is recovering from a supply-demand imbalance,fueled by strong population and job growth.Though office faces challenges,positive signs of recovery are emerging,with investors seizing discounted pricing.Overall,investors increasingly prioritize fundamental strength and asset quality in this evolving environment.DallasMarket spotlight|H1 2025H1 Market snapshotAsset classTotal dollar volumeNumber of salesPrice psf range Cap rate rangeOffice$1,419,973,14983$170-$2806.80%-8.30%Multifamily$6,319,634,250153$130-$2005.10%-5.80%Retail$1,246,442,491108$200-$3605.70%-7.40velopment$2,251,682,94438$10-$30-Industrial$2,281,682,944154$100-$1506.20%-7.70%$21B$28B$22B$44B$38B$21B$21B$27B$0$10$20$30$40$5020182019202020212022202320242025(Annualized)MultifamilyDevelopmentIndustrialOfficeRetailTotal Dallas dollar volume by asset classBillions1,1321,3111,0961,7771,5499339941,07205001,0001,5002,00020182019202020212022202320242025(Annualized)MultifamilyDevelopmentIndustrialOfficeRetailNumber of sales by asset classVolume changeCount changeOffice29.5.8%Multifamily 138.6.6%Retail 45.56.7velopment 680.8%7.5%Industrial 4.33.6%On the move(compared to H1 2024)#of salesInvestment sales summaryPage 4 U.S.Capital Markets Group|U.S.investment sales report Source:Avison Young Market Intelligence,Real Capital AnalyticsInvestment sales summarySan Francisco/Bay AreaMarket spotlight|H1 2025H1 Market snapshotThe San Francisco investment sales market experienced a successful start to 2025,with a total sales volume of$8.6 billion,a 11.7%increase compared to the first half of 2024.A total of 469 transactions closed during the first half,with 223 multifamily and 90 industrial deals leading the way.As COVID continues to have a lingering effect on the office market,we see office sales coming at major discounts,but with volume slowly increasing.On the bright side,there was an influx development deals,with a 64.5%volume increase from the first half of 2024.Although the investment sales market remains stagnant in the San Francisco Bay area,we do see the market slowly recovering,outpacing the volume seen in 2024.Asset classTotal dollar volumeNumber of salesPrice psf range Cap rate rangeOffice$3,517,160,68182$250-$5104.14%-6.42%Multifamily$2,978,413,963223$310-$4605.14%-6.10%Retail$493,005,83849$330-$6006.24%-6.46velopment$397,799,15225$40-$160-Industrial$1,197,023,40490$210-$3506.00%-6.57%$27B$39B$26B$35B$24B$13B$16B$17B$0$10$20$30$40$5020182019202020212022202320242025(Annualized)MultifamilyDevelopmentIndustrialOfficeRetailTotal San Francisco/Bay Area dollar volume by asset classBillions1,3961,2889631,5031,31380995093805001,0001,5002,00020182019202020212022202320242025(Annualized)MultifamilyDevelopmentIndustrialOfficeRetailNumber of sales by asset classVolume changeCount changeOffice 137.6.7%Multifamily 1.2.3%Retail 28.33.7velopment 64.5G.1%Industrial 49.1.4%On the move(compared to H1 2024)#of salesPage 5 U.S.Capital Markets Group|U.S.investment sales report Source:Avison Young Market Intelligence,Real Capital AnalyticsInvestment sales summaryNew YorkMarket spotlight|H1 2025H1 Market snapshotThe New York investment sales market saw a noticeable improvement in transaction count but not as large as a volume increase in the first half of 2025.For the first half of 2025,New York recorded 480 transactions valued at$7.5 billion in total dollar volume.The first half of 2025 represented a 16.8%increase in transaction count and an 3.5%increase in dollar volume when compared to the first half of 2024,respectively.When annualized,2025 is on pace to see an 7.3%and 29.1crease off 2024,respectively.There is confidence that with large notable deals under contract projected to close in the second half of the year that 2025 will elevate its volume by years end.Asset classTotal dollar volumeNumber of salesPrice psf range Cap rate rangeOffice$1,851,002,66861$115-$2,685-Multifamily$2,424,021,536205$80-$1,9673.73%-8.25%Retail$1,389,868,12699$115-$20,5264.15%-9.14velopment$1,415,288,80068$82-$2,314(bsf)-Industrial$400,658,51047$131-$1,948-$46B$42B$28B$33B$35B$19B$21B$15B$0$10$20$30$40$5020182019202020212022202320242025(Annualized)MultifamilyDevelopmentIndustrialOfficeRetailTotal New York dollar volume by asset classBillions1,5821,2339611,2651,2619761,03696005001,0001,5002,00020182019202020212022202320242025(Annualized)MultifamilyDevelopmentIndustrialOfficeRetailNumber of sales by asset class#of sSalesVolume changeCount changeOffice 47.2.5%Multifamily 2.3.3%Retail 25.6 .7velopment 29.5.3%Industrial 23.9.9%On the move(compared to H1 2024)Page 6 U.S.Capital Markets Group|U.S.investment sales report Source:Avison Young Market Intelligence,Real Capital AnalyticsInvestment sales summaryLos AngelesMarket spotlight|H1 2025H1 Market snapshotThe Los Angeles investment sales market had a subdued start in the first half 2025,following two straight years of decreased sales volume.Total sales volume for H1 2025 reached$6.3 billion,nearly$1.2 billion less than the first half of 2024.A total of 591 transactions closed throughout the first half of 2025,with 220 multifamily and 172 industrial deals leading the way.Although the office market is slowly recovering,we see an influx of Class A and Trophy office buildings selling in 2025,marking a 115.8%increase in volume from H1 2024.However,overall capital markets activity remains slow due to tighter lending conditions and investor uncertainty.Asset classTotal dollar volumeNumber of salesPrice psf range Cap rate rangeOffice$1,494,493,81680$290-$6905.41%-6.36%Multifamily$2,037,546,082220$270-$3705.41%-6.35%Retail$874,636,390106$330-$7005.30%-6.36velopment$187,279,87613$80-$170-Industrial$1,664,493,816172$240-$3605.17%-7.12%$24B$28B$19B$31B$31B$19B$15B$13B$0$5$10$15$20$25$30$3520182019202020212022202320242025(Annualized)MultifamilyDevelopmentIndustrialOfficeRetailTotal Los Angeles dollar volume by asset classBillions1,8871,9811,4572,2672,1101,4261,2811,18205001,0001,5002,0002,50020182019202020212022202320242025(Annualized)MultifamilyDevelopmentIndustrialOfficeRetailNumber of sales by asset classVolume changeCount changeOffice 115.8%1.3%Multifamily 11.2%2.3%Retail 14.7.7velopment 89.1.7%Industrial 30.8%3.9%On the move(compared to H1 2024)#of salesPage 7 U.S.Capital Markets Group|U.S.investment sales report Source:Avison Young Market Intelligence,Real Capital AnalyticsThe Phoenix investment sales market has slowly picked up in the first half of 2025,following a moderately successful 2024.Total sales volume for H1 2025 reached$5.9 billion,primarily due to an influx in industrial sales.A total of 342 transactions closed during the first two quarters,with 123 industrial and 63 retail deals leading the way.Industrial sales volume is up 65.8%from the first half of 2024,stemming Phoenixs successful industrial landscape.Additionally,we see an influx in development deals,where investors are looking to capitalize on land and reuse properties for construction.Investment sales summaryPhoenixMarket spotlight|H1 2025H1 Market snapshotAsset classTotal dollar volumeNumber of salesPrice psf range Cap rate rangeOffice$589,986,82858$190-$3806.42%-6.74%Multifamily$1,907,296,91346$220-$3004.79%-6.15%Retail$559,823,57863$210-$4205.98%-6.74velopment$868,676,94652$10-$30-Industrial$2,003,093,796123$170-$2505.80%-5.93%$12B$16B$12B$28B$24B$10B$14B$12B$0$5$10$15$20$25$30$3520182019202020212022202320242025(Annualized)MultifamilyDevelopmentIndustrialOfficeRetailTotal Phoenix dollar volume by asset classBillions7599647281,4251,10262567768405001,0001,5002,00020182019202020212022202320242025(Annualized)MultifamilyDevelopmentIndustrialOfficeRetailNumber of sales by asset classVolume changeCount changeOffice 3.1%1.8%Multifamily 2.0%9.5%Retail 30.1%8.6velopment 56.5g.7%Industrial 65.8%.5%On the move(compared to H1 2024)#of salesPage 8 U.S.Capital Markets Group|U.S.investment sales report Source:Avison Young Market Intelligence,Real Capital AnalyticsThe DC investment sales market recorded 198 transactions totaling$5.2B in H1 2025.Activity will rise as lenders resolve troubled loans.The deeper disruption stems from GSA lease terminations and DOGE-led asset dispositions,unleashing millions of square feet of obsolete office.Adaptive reuse is now the prevailing strategy,with DC leading the nation in office-to-residential conversions.Multifamily remains strong,supported by rent growth and steady absorption.Surging data center demand is redefining land values across the region,driving office redevelopments and pushing residential and industrial land pricing to new highs.In Northern Virginia,logistics demand continues to attract industrial capital.Investment sales summaryWashington,DCMarket spotlight|H1 2025H1 Market snapshotAsset classTotal dollar volumeNumber of salesPrice psf range Cap rate rangeOffice$1,737,767,86062$119-$3209.21%-10.15%Multifamily$1,396,348,03535$165-$2994.70%-5.55%Retail$450,937,39836$273-$6126.05%-7.16velopment$945,513,02622$15-$57-Industrial$674,410,42843$183-$3515.79%-6.70%$19B$24B$14B$24B$20B$13B$19B$10B$0$5$10$15$20$25$3020182019202020212022202320242025(Annualized)MultifamilyDevelopmentIndustrialOfficeRetailTotal Washington,D.C.dollar volume by asset classBillions641697493664659443466396020040060080020182019202020212022202320242025(Annualized)MultifamilyDevelopmentIndustrialOfficeRetailNumber of sales by asset classVolume changeCount changeOffice 57.3!.6%Multifamily 14.8%2.9%Retail 58.8.0velopment 65.6.0%Industrial 56.6H.3%On the move(compared to H1 2024)#of salesPage 9 U.S.Capital Markets Group|U.S.investment sales report Source:Avison Young Market Intelligence,Real Capital AnalyticsInvestment sales summaryChicagoMarket spotlight|H1 2025H1 Market snapshotThe Chicago MSA investment sales market had a depressed second quarter,continuing mixed sentiment from Q1.For Q2 2025,Chicago recorded 179 transactions valued at$2.0 billion in total dollar volume.Through H1 2025,Chicago saw an 18.0cline in transaction volume,but an 8.0%rise in transaction activity from H1 2024.Some industries are seeing dynamic shifts in their transaction markets through H1 2025.Office and industrial properties are seeing declines in dollar volume,-$24M and-$1.3B,respectively,but significant increases in count,suggesting diminished pricing.Multifamily,however,has seen a$500M volume jump with 4.7%less transactions.Asset classTotal dollar volumeNumber of salesPrice psf range Cap rate rangeOffice$610,755,71270$66-$2007.95%-11.20%Multifamily$1,580,499,55482$120-$2435.70%-6.85%Retail$957,523,89590$141-$3287.58%-8.54velopment$214,839,77424$22-$155-Industrial$1,430,043,688139$83-$1295.52%-7.15%$19B$18B$12B$20B$19B$13B$13B$10B$0$5$10$15$20$2520182019202020212022202320242025(Annualized)MultifamilyDevelopmentIndustrialOfficeRetailTotal Chicago dollar volume by asset classBillions1,215 1,312 1,001 1,553 1,686 987 883 810 05001,0001,5002,00020182019202020212022202320242025(Annualized)ApartmentDevelopmentIndustrialOfficeRetailNumber of sales by asset class#of salesVolume changeCount changeOffice 3.84.6%Multifamily 45.2%4.7%Retail 13.3%8.2velopment 18.0%7.7%Industrial 48.6#.0%On the move(compared to H1 2024)Page 10 U.S.Capital Markets Group|U.S.investment sales report Source:Avison Young Market Intelligence,Real Capital AnalyticsInvestment sales summaryAtlantaMarket spotlight|H1 2025H1 Market snapshotAtlantas investment sales market saw a noticeable uptick in activity during the second quarter,with certain asset classes posting a marked increase in transactions.A total of 122 deals were recorded,totaling$1.8B in volume.Despite this momentum,overall dollar volume across all asset types declined 22.0%compared to H1 2024.However,the office sector showed signs of revival in Q2 after an extended period of sluggish performance.Development activity also picked up following a slow start to the year,while industrial activity began to coola notable shift for Atlanta.Looking ahead,transaction volume is expected to continue rising within specific asset classes as the market leans further into opportunistic buying.Asset classTotal dollar volumeNumber of salesPrice psf range Cap rate rangeOffice$901,397,40452$54-$6097.50%-10.50%Multifamily$1,232,748,33038$78-$3185.25%-5.50%Retail$501,136,59275$50-$1,8006.00%-7.50velopment$334,798,62838$6-$110-Industrial$1,105,569,96793$50-$5906.00%-8.00%$15B$19B$14B$35B$26B$12B$15B$8B$0$10$20$30$4020182019202020212022202320242025(Annualized)MultifamilyDevelopmentIndustrialOfficeRetailTotal Atlanta dollar volume by asset classBillions8371,0948061,4911,14173384759205001,0001,5002,00020182019202020212022202320242025(Annualized)MultifamilyDevelopmentIndustrialOfficeRetailNumber of sales by asset class#of sales Volume changeCount changeOffice 86.5.5%Multifamily 34.6$.0%Retail 38.2%1.3velopment 15.2.2%Industrial 9.7%7.0%On the move(compared to H1 2024)Page 11 U.S.Capital Markets Group|U.S.investment sales report Source:Avison Young Market Intelligence,Real Capital AnalyticsInvestment sales summaryMiamiMarket spotlight|H1 2025H1 Market snapshotMiami recorded 192 transactions totaling approximately$3.4 billion in the first half of 2025.Retail assets accounted for the greatest total dollar volume,at$937M across 41 transactions,followed closely by multifamily-logging$905M across 47 total transactions.H1 2025 marked a shift in investor sentiment,with capital flowing back into core assets at scale.Double-digit volume gains across asset types highlight renewed confidence and position Miami as a strong long-term bet.While deal count may fall slightly short of 2024,dollar volume is on pace to surpass it-which would mark three consecutive years of growth.Asset classTotal dollar volumeNumber of salesPrice psf range Cap rate rangeOffice$601,324,45234$320-$5905.00%-7.20%Multifamily$904,683,82747$240-$3504.80%-6.20%Retail$936,929,52441$360-$6306.00%-7.20velopment$441,393,82716$70-$180-Industrial$564,636,84454$180-$3105.00%-7.70%$5B$6B$4B$13B$13B$6B$7B$7B$0$5$10$15$2020182019202020212022202320242025(Annualized)MultifamilyDevelopmentIndustrialOfficeRetailTotal Miami dollar volume by asset classBillions401424303694677415423390020040060080020182019202020212022202320242025(Annualized)MultifamilyDevelopmentIndustrialOfficeRetailNumber of sales by asset classVolume changeCount changeOffice 54.7.3%Multifamily 44.3(.9Retail 42.3.2velopment 27.5%5.9%Industrial 26.4%3.9%On the move(compared to H1 2024)#of salesPage 12 U.S.Capital Markets Group|U.S.investment sales report Source:Avison Young Market Intelligence,Real Capital AnalyticsInvestment sales summaryDenverMarket spotlight|H1 2025H1 Market snapshotDenvers investment sales market had a strong first half of 2025 with 189 transactions totaling$3.1 billion across all asset types,a 29%increase from H1 2024.Multifamily and industrial assets led H1 transaction volume,though performance varied by sector.Despite higher interest rates dampening larger deals,Denvers market is demonstrating adaptability and finding its footing.Industrial and retail show relative strength,while multifamily navigates supply towards stabilization driven by population and job growth.The office sector,despite challenges,sees a flight-to-quality trend.Investors are increasingly focusing on fundamental strength and asset quality as they navigate this evolving environment,pointing to a resilient market.Asset classTotal dollar volumeNumber of salesPrice psf range Cap rate rangeOffice$636,134,76342$90-$3006.76%-9.50%Multifamily$1,065,389,57635$220-$3204.64%-5.03%Retail$327,050,79931$200-$4005.83%-6.43velopment$254,326,57319$10-$80-Industrial$836,123,69462$180-$2306.24%-6.51%$11B$12B$8B$16B$11B$5B$8B$6B$0$5$10$15$2020182019202020212022202320242025(Annualized)MultifamilyDevelopmentIndustrialOfficeRetailTotal Denver dollar volume by asset classBillions614590446712626325390378020040060080020182019202020212022202320242025(Annualized)MultifamilyDevelopmentIndustrialOfficeRetailNumber of sales by asset classVolume changeCount changeOffice 250.1.9%Multifamily 15.0.6%Retail 50.3).2velopment 1,159.775.0%Industrial 12.0%0.0%On the move(compared to H1 2024)#of salesPage 13 U.S.Capital Markets Group|U.S.investment sales report Source:Avison Young Market Intelligence,Real Capital AnalyticsInvestment sales summaryAustinMarket spotlight|H1 2025H1 Market snapshotThe Austin investment sales market saw a strong first-half of 2025,with 103 transactions totaling$3.0 billion across all asset types,which is inline with last years first half volume.Multifamily and development assets led H1 transaction volume.The multifamily sector,while navigating significant prior oversupply,shows stabilization with positive absorption and declining vacancy,signaling stronger fundamentals as new deliveries slow.Industrial maintains resilience despite rising vacancy,supported by robust high-tech manufacturing demand.Investors are increasingly selective,focusing on quality assets and strong underlying economics across all sectors as the market continues to find its footing.Asset classTotal dollar volumeNumber of salesPrice psf range Cap rate rangeOffice$280,128,06523$210-$4306.60%-9.50%Multifamily$1,319,134,03626$200-$2304.60%-6.00%Retail$185,432,98516$320-$4105.00%-6.90velopment$739,874,4786$10-$20-Industrial$496,886,77732$170-$2106.70%-9.00%$8B$10B$7B$16B$11B$7B$6B$6B$0$5$10$15$2020182019202020212022202320242025(Annualized)MultifamilyDevelopmentIndustrialOfficeRetailTotal Austin dollar volume by asset classBillions320405283505411268244206010020030040050060020182019202020212022202320242025(Annualized)ApartmentDevelopmentIndustrialOfficeRetailNumber of sales by asset classVolume changeCount changeOffice 53.9.8%Multifamily 7.0.8%Retail 7.20.4velopment 369.1.0%Industrial 19.6.3%On the move(compared to H1 2024)#of salesPage 14 U.S.Capital Markets Group|U.S.investment sales report Source:Avison Young Market Intelligence,Real Capital AnalyticsInvestment sales summaryCharlotteMarket spotlight|H1 2025H1 Market snapshotThe Charlotte investment sales market delivered a nuanced performance through the first half of 2025.While transaction counts declined across every asset class aside from retail,dollar volume gains emerged in retail,development,and industrial sectors-reflecting selective momentum beneath the surface.Office sales slipped in both count and dollar volume,yet investor appetite remains intact,buoyed by attractively priced assets and steady leasing activity across the metro.Multifamily may be pacing slower than its H1 2024 benchmark,but it continues to dominate overall sales volume,reaffirming Charlottes strength as a regional magnet for multifamily investment.Asset classTotal dollar volumeNumber of salesPrice psf range Cap rate rangeOffice$269,679,25918$51-$3946.45%-8.30%Multifamily$730,392,594 21$117-$3234.60%-5.56%Retail$356,790,84547$97-$7754.10%-9.52velopment$239,554,23523$1-$195-Industrial$689,435,12451$16-$3505.87%-7.20%$6B$9B$6B$12B$11B$4B$8B$5B$0$2$4$6$8$10$12$1420182019202020212022202320242025(Annualized)MultifamilyDevelopmentIndustrialOfficeRetailTotal Charlotte dollar volume by asset classBillions346433363584505326402326010020030040050060070020182019202020212022202320242025(Annualized)MultifamilyDevelopmentIndustrialOfficeRetailNumber of sales by asset class#of salesVolume changeCount changeOffice 35.3.0%Multifamily 20.2%.0%Retail 69.7.6velopment 35.3.9%Industrial 7.5!.5%On the move(compared to H1 2024)Page 15 U.S.Capital Markets Group|U.S.investment sales report Source:Avison Young Market Intelligence,Real Capital Analytics2025 YTD market buyer segments across the U.S.Cross-borderInstitutionalREIT/listedPrivateUser/otherNew York8.7.2%3.4a.4.2%Los Angeles4.3.3%4.1p.4%6.9llas8.2(.6%4.7D.4.1%Phoenix7.6$.1%0.5c.3%4.5%Austin5.5.9.0f.8%3.8%Charlotte4.8%.6%5.7W.7%6.2%Atlanta4.0.2%2.5q.6%4.7%Chicago6.2.5%1.1q.6%5.5%Washington,DC6.3(.1%4.2P.3.1%Miami6.3 .5%9.4X.5%5.3nver1.0A.5%2.1A.1.3%San Francisco/Bay Area6.2.6%6.72.81.8%Note:Percentages based off dollar volume of buyer profileSource:Avison Young Market Intelligence,Real Capital AnalyticsPage 16 U.S.Capital Markets Group|U.S.investment sales report Source:Avison Young Market Intelligence,Real Capital AnalyticsFor more market insights and information visit 2025 Avison Young.All rights reserved.E.&O.E.:The information contained herein was obtained from sources which we deem reliable and,while thought to be correct,is not guaranteed by Avison Young.James NelsonPrincipal,Head of U.S.Investment Sales 1 212 729 Erik EdeenPrincipal,Senior Director of U.S.Investment Sales 1 212 729 Marion JonesPrincipal,Executive Managing Director of U.S.Capital Markets 1 212 729
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REPORTEUROPEREAL ESTATECBRE RESEARCHAUGUST 20252025 European Real Estate Market Outlook Mid-Year ReviewIntelligent Investment2CBRE RESEARCH 2025 CBRE,INC.Intelligent Investment2025 Mid-Year Market Outlook|EUROPEOverviewWelcome to CBREs 2025 European Real Estate Outlook Mid-Year Review.In this report,we revisit the predictions we made at the beginning of the year and share our perspective for the months ahead.Despite increased uncertainty in the global economy,Europes consumer-led economic recovery continues,but at a slower pace,given lower levels of confidence.Following four rate cuts by the ECB earlier this year,we expect one further cut in 2025.The BoE has cut rates twice,and we anticipate three further cuts this year in line with market expectations.Although our economic outlook has softened amid current global tensions,we still expect GDP growth to improve compared to 2024.Capital markets activity has gained momentum,driven by a material improvement in financing conditions.We expect further improvement in the latter half of the year,with stronger buying appetite being matched by increased asset availability,partly due to a wave of upcoming loan and equity maturities.Investor interest is strongest in the living sector,with broader buying strategies emerging.Logistics shows an expanding gulf between prime and secondary assets,with building specification increasing in importance.Office investment continues to see strong momentum as investors return to the sector.Retail meanwhile sees a resurgence in large shopping centre deals due to attractive entry yields.Interesting dynamics are also emerging with regardsto sector drivers and occupier markets.Living remains undersupplied,with the situation expected to worsen further as investors increasingly opt to buy rental assets and eventually sell them on the owner-occupied market.Resolving the imbalance will require bold government incentives.Logistics take-up has stabilised,and occupier decision-making remains cautious amid ongoing uncertainty.Vacancy rates continue to rise but are expected to peak later this year as construction activity slows.Occupiers focus on top quality office space has widened the gulf between CBDs and less central submarkets.Growth in office-based employmentis supporting demand,with further rental increases anticipated in the remainder of the year.An ongoing focus on flagship store formatsin the best retail locations has led to strong demandin prime high streets,though secondary space lags.Retail parks are a standout segment,and one in which we expect continued rental growth outperformance.The continued rise in international tourist arrivalsacross Europe has had a positive impact on thehotels sector.While the pace of RevPAR increaseshas moderated compared to 2024,it continues to growat a healthy pace.A slowdown in new hotel openingsis expected to support further upward pressure onroom rates.A sharp imbalance between demand and supplypersists in the data centres sector,with demandfuelled by hyperscalers and the AI boom.Vacancy rates,already at a record low,will continue to compress in the latter part of the year,further fuelling rental growth.Finally,sustainability continues to increasein importance for investors,lenders and occupiers.Europes leadership in this area positions it wellto attract sustainability-conscious capital.Tasos VezyridisExecutive Director,Head of Research,UK&I and Continental EuropeEconomic Outlook014CBRE RESEARCH 2025 CBRE,INC.Intelligent Investment2025 Mid-Year Market Outlook|EUROPEEconomic OutlookForecastJanuary 2025LABOUR MARKET TIGHTNESSWILL BE A GROWTH CONSTRAINTLow unemployment and rising real wages will continueto boost consumption,but tight labour markets mayconstrain long-term business expansion.Supply side reforms and increased productivity may be necessary to sustaineconomic growth.RISING UNCERTAINTY KEEPS RISKS HIGHPolitical instability and continued geopolitical tensionspose a risk to inflation expectations and economic sentiment.Possible tariffs from the U.S.could be a downside risk to the global outlook.The expected consumer-led recovery is still underway,but at a slower pace.Falling interest rates and rises inreal incomes are still supportive of consumer spending.Following four 25bps cuts so far this year,we now anticipate the ECB will make one further rate cut of 25bps towards the end of the year,putting the main refinancing rate at 1.9%as inflation continues to hover around 2%.We expect the BoE to cut rates three times before year end to put rates at 3.5%,as inflation is expected to peak in September and then begin to oscillate towards 2%.LOWER INFLATION AND INTEREST RATESTO DRIVE GROWTHFalling inflation,driven by lower energy and goods prices,should allow the ECB to cut its main refinancing rate by 100bps by the end of the year.Lower inflation will boost real wages and increase consumption.The rapid pace of policy changes has lowered business sentiment and long-term growth expectations.In turn,we have revised our employment forecasts down as firms remain cautious,limiting employment growth in themedium-term.We expect that the large fiscal stimulus package inGermany will help offset the potential negative drag from weaker trade.U.S.President Trump and President of the EuropeanCommission,Ursula von der Leyen,have negotiated a deal in principle of a 15%tariff on almost all European exports to the U.S.,except for steel,aluminium,and pharmaceuticals.A UK deal was reached in May that set a 10%tariff on UK exports to the U.S.,with some exceptions and exemptions.The prospect of lower inflation and policy rate cuts has helped reverse the increases in longer-dated debt costs that followed the German fiscal policy announcement in March.However,increased global uncertainty continues to bea downside risk to our outlook.Mid-yearreview0102035CBRE RESEARCH 2025 CBRE,INC.Intelligent Investment2025 Mid-Year Market Outlook|EUROPENote:Western Europe includes Belgium,Denmark,Finland,France,Germany,Ireland,Italy,Luxembourg,Netherlands,Norway,Portugal,Spain,Sweden,and Switzerland.Source:CBRE Forecast,Oxford EconomicsFigure 1:Forecast expectations for 2025 by forecast vintage,Western EuropeDownward revision in growth forecastOptimism from H2 2024,which was factored into our original 2025 projections,has fallen back in the face of current global tensions.Central and Eastern European economies are forecastto see the strongest growth as their economies continueto build momentum.Strong monetary and fiscal policy responses have helped maintain European momentum as policy rates continueto fall and public spending boosts investment.Bond yields to remain elevatedEarly in the year,the prospect of lower inflation and policy rate cuts helped reverse the increases in longer-dated debt costs that followed the German fiscal policy announcement in March.Through the rest of the year,higher global inflation concerns mean we now expect long rates to be elevatedin the medium-term relative to previous cycles.Outlook softened by indecisionFigure 2:Ten-year government bond yields and forecast(%)-10123456Q2 2002Q2 2003Q2 2004Q2 2005Q2 2006Q2 2007Q2 2008Q2 2009Q2 2010Q2 2011Q2 2012Q2 2013Q2 2014Q2 2015Q2 2016Q2 2017Q2 2018Q2 2019Q2 2020Q2 2021Q2 2022Q2 2023Q2 2024Q2 2025Q2 2026Q2 2027Western EuropeWestern Europe(Dec 2024)UK(Dec 2024)UKFORECAST0123456GDP Growth,Annual average(%)CPI,Annualaverage(%)10-Year TreasuryYield(%)Number of ECBCuts for 2025JanuaryJuneCapital Markets027CBRE RESEARCH 2025 CBRE,INC.Intelligent Investment2025 Mid-Year Market Outlook|EUROPECapital MarketsForecastJanuary 2025RETURN OF INTERNATIONAL CAPITAL2025 is expected to see a further return of international capital,supported by comparatively low borrowing costs and a favourable Euro-Dollar exchange rate.A large proportion ofthis is earmarked for value-add and opportunistic strategies.This capital will need to be deployed before prices fully recover to achieve target levered returns in the mid-to-high teens.CAPITAL VALUES GRADUALLY RECOVERINGAll sectors are seeing positive momentum,with capital values expected to gradually improve from their 2024 troughs.This has been driven by rental growth and yield stabilisation,with some markets showing early signs of yield compression.The market was off to a strong start,with a solid Q1 performance,despite turbulence in fixed income marketsin January.In Q2,decision-making slowed after the U.S.reciprocal tariffs announcement on 2 April.However,closing activity picked up in June with positive investment sentiment in Europe.Financing conditions have materially improved.While five-year swap rates mostly moved sideways,this was offset bya compression in margins resulting in lower borrowing costs,especially in Euro-denominated countries.IMPROVEMENT IN TRANSACTION ACTIVITYImprovement in the European real estate transactionmarket is set to continue in 2025,as bid-ask spreads converge further.The principal demand drivers are more product coming up for sale,improved financing conditions,and a growing appetite for large transactions.Cross-regional capital(originating outside of Europe)has seen the fastest recovery.Since the trough in Q1 2024,cross-regional capital flows have increased by 20%,compared to 13%for domestic capital,and 5%for cross-border capital from within Europe.However,the Euro-Dollar exchange rate has become moderately less favourable,which could impact investment in H2.The increase in cross-regional capital flows coincides witha resurgence in activity by private equity,with volumes up 25%.Many private equity firms are based in the U.S.Listed companies have seen an even stronger resurgencein activity,with volumes up by 144%since the trough.We expect this group to remain active as they benefit from direct access to funding at a relatively low cost of capitalin the current interest rate environment.Prime office capital values have seen the strongest recovery,and since the trough at the end of 2023,values have increased by 13%as of Q2 2025.The other sectors multifamily,industrial,and retail have recovered between 5%and 10%of their value.The recovery in values is mostly driven by rental growth.Despite some markets reporting yield compression,the yield impact on values in the first six months of the year is c.1%at a European level.It is important to note that these values refer to the prime end of the market and the recovery in other segments can be more sluggish.Mid-yearreview0102038CBRE RESEARCH 2025 CBRE,INC.Intelligent Investment2025 Mid-Year Market Outlook|EUROPESource:CBRE ResearchFigure 3:Capital value change(Index,December 2019=100)Promising second half of 2025 expectedAlthough the market has lost some momentum since the strong end to 2024,we still see a good level of transaction activity in Europe.Investment data for Continental Europe indicates that the market was up by 6%year-on-year inQ2 2025.Given the hit to sentiment following the tariffs uncertainty,this is a positive result,showing resilience and investors commitment to getting deals done in the current market environment.Investment activity has weakened howeverin the UK,where five-year swap rates are c.200bps higher than in Euro-denominated countries.The outlook for H2 is promising,with sales activity expected to pick upas confidence returns,with some investors explicitly expressing positive sentiment towards Europe.2025 is an important year for loan and equity maturities,which will create considerable transaction opportunities withmore product being put up for sale now that demand is rebounding.Sector outlookThe resurgence in office sales in early 2025 is expected to continue as more investors are pivoting back to the sector.Living is seeing investors enterthe sector with a wide range of strategies,such as BTR,platform/M&A transactions,standing assets,and privatisation across all asset types,from student housing to senior living.The retail sector is building on strong momentum as entry yields are favourable,and fundamentals are resilientin the prime segment.Logisticsinvestors will continue to be attentive tothe subdued occupier market,with tariff concerns and macroeconomic uncertainty making them more cautious,particularly on secondary assets.Hotelsare seeing notable interest in value-add investments due to operational improvement potential.As companies spending on AI continues to increase,investors appetite for data centres will remain strong.Sentiment looks to have recovered from initial tariff impact5060708090100110120130140150160All PropertyIndustrial&LogisticsOfficeRetail-High StreetLiving0310CBRE RESEARCH 2025 CBRE,INC.Intelligent Investment2025 Mid-Year Market Outlook|EUROPELivingForecastJanuary 2025AFFORDABILITY CHALLENGES AND REGULATIONRising rental costs and tight markets are exacerbating affordability issues for tenants,leading to discussions about regulatory interventions,despite past measures like rent controls being shown to potentially worsen the situation.Increased privatisation and reduced rental options further complicate the affordability landscape,risking a surge in rental prices.PRIVATISATION INCREASES AFFORDABILITY ISSUESA combination of elevated interest rates(2022-2023)and the expansion of rent regulation across Europe has significantly increased the pricing gap between owner-occupied and rental properties.This shift is anticipated to incentivise a privatisation strategy among investors,reducing the supply of rental housing.This will exacerbate existing affordability challenges within therental market.In 2024,the number of permits issued continued to fall,with just 60.5%of the targeted level of permits being granted.Early indicators for 2025 show a continuation of this trend.In addition,the demand for housing is still increasing,partly due to high migration rates.Migration and the housing market continue to dominatenational and local election agendas,with governments exploring incentives to increase housing production.Nevertheless,in the coming years,the housing shortage is expected to exceedten million homes.WORSENING HOUSING SHORTAGEEuropes housing shortage is estimated at 3.5%of total housing stock,equating to approximately 9.6 million required homes.This situation is expected to be exacerbated by declining levels of new construction permits,despite rising demand.Housing delivery is expected to reach only 64%of desired levels in 2025,despite existing production targets and stimulus packages.Partly because of the continuing scarcity of housing,the debate around affordability remains.However,looking at the latest Oxford Economics forecast of income growth in the EU(a 4.6%year-on-year increase in 2025)and rent increases(4.3%growth according to CBREs forecast),affordability looks to see a slight improvement overall.Housing remains a key issue on political agendas,with more countries focusing on improving affordability to boost new construction rather than increasing regulations,a clear tiltin policy.Recent examples can be seen in Ireland and the UK.After several years of restrictive rental policies in Ireland,the Government is legislating to encourage new housing construction.In the UK,a new 39 billion affordable housing programmeis being introduced to boost construction of new social housing.More countries are expected to deregulate their housing markets to increase investment in the coming years.An increasing trend is privatisationin the rental housingmarket.Private equity investors and family office investorsare buying up rental properties to eventually sell them on the owner-occupied housing market.This activity will slow the expansion of rental housing supply,and will potentially leadto stagnationor contraction,exacerbating existing affordability and availability concerns.These trends are anticipated to persist and broaden in scope,largely influenced by the divergence between vacant possession values and capital values.The precise extent of these impacts will be contingent upon several factors,including the characteristics of the specific properties,tenant turnover rates,the strength of existing tenant protections,and anticipated developments in vacant possession value.Mid-yearreview01020311CBRE RESEARCH 2025 CBRE,INC.Intelligent Investment2025 Mid-Year Market Outlook|EUROPENote:Size of bubble corresponds to the maximum permit level in the last five yearsSource:Eurostat,Glenigan,CBRE ResearchFigure 4:Residential permit level in 2024(thousands)vs 2024 permit level relative to recent peak(%)Poor prospects due to low European permit levelsMost countries have seen a decrease in permits since the beginning of the year due to:(1)increased regulation,(2)slow decision-making and limited capacityin the permitting process,and(3)profitability concerns due to the ratio of yield potential to rising construction costs.This ensures that current building permit levels are still far behind their 2021 peak.In Finland,Sweden,Germany,and Austria,particularly,the number of permitted housing units remains well behind government targets and market needs.In cities like Hamburg,Frankfurt,Stockholm,Gothenburg,Dusseldorf,and Turku,this stagnation has caused a sharp rise in rents of over 6%year-on-year.Due to the ongoing housing shortage,the pressure on rents continues.Rents are also expected to rise on average by c.3.3%per year in major European cities between 2026 and 2030.Bold incentives needed to fix the marketAddressing Europes housing shortage demands a multi-pronged approach,with significant incentives rolled out at European,national,and local levels.The European Commission is scheduled to unveil its Action Plan for Affordable Housing in 2026.A key component of this plan will be a decision on subsidised financing for affordable,mid-range housing.Crucially,this financing strategy must ensure a fair and competitive environment for both investors and social housing organisations.This balanced approach is essential to unlock the full financial potential needed to effectively alleviate the housing crisis across Europe.On a national and local scale,the focus should be on reducing regulation,reducing permit processes,and increasing the work capacity of local authorities to expedite the granting of permits and allow capital to be deployed.Permit levels fall short of expectationsBelgiumCzechiaDenmarkGermanyIrelandSpainFranceItalyHungaryNetherlandsAustriaPolandPortugalRomaniaSloveniaSlovakiaFinlandSwedenNorwayGreat Britian050100150200250300350-70%-60%-50%-40%-30%-20%-10%0%Number of permits in 2024(thousands)Permit level in 2024 vs peak permit level over last five yearsLogistics0413CBRE RESEARCH 2025 CBRE,INC.Intelligent Investment2025 Mid-Year Market Outlook|EUROPELogisticsForecastJanuary 2025VACANCY RATES TO STABILISE Despite a significant slowdown in the delivery of new stock,the average European vacancy rate increased during the first three quarters of 2024,though it is expected to stabilise during 2025.This new market equilibrium gives tenants more negotiating power,especially outside the prime segmentand core locations.BUILDING SPECIFICATIONS WILLINCREASE IN IMPORTANCEBuilding selection is becoming a key factor as occupiershave more options available and start to implement strategiesto future-proof their supply chains.This includes ensuring that their warehouses specifications are fit for current andfuture needs.Take-up has stabilised,and expectations for improved performance in the second half of the year remain.However,take-up is resulting in lower net absorptiondue to occupiers rationalisation and relocation strategies.The recent agreement on tariffs between the U.S.and the EU is expected to reduce uncertainty for European logistics occupiers,potentially supporting the abovementioned market strengthening in the second half of the year.However,findings from our European Logistics Occupier Survey 2025 suggest that many occupiers had already factored in such geopolitical risks,or did not view tariffs as an immediate constraint to their real estate requirements.LEASING ACTIVITY TO STRENGTHEN IN H2Demand has fluctuated at lower levels relative to recentyears,but a clearer macroeconomic landscape should unlock some postponed occupier expansion plans.Leasing activityis expected to pick up from current levels,particularly in the second half of 2025.The vacancy rate continued to rise during the first months of 2025 and now exceeds 5%for the first time in over a decade.Our forecasts still point to a stabilisation later in 2025.Annualised new stock deliveries have reached theirlowest level since early 2018,while the volume of space under construction(mostly pre-committed)has stabilisedat c.4%of total stock,down from nearly 7%in 2022.However,there are significant discrepancies in vacancy rates and development activity across countries,and even within individual countries.Logistics occupiers have not yet fully capitalised on thenew market conditions,largely due to internal challengesin securing approval for real estate expansions or upgrades amid ongoing market instability.Average prime rental growth rebounded above thehistorical average at the beginning of the year,driven by increases in prime locations such as Manchester,Warsaw,Paris,Madrid,and Schiphol.This result exceeded market expectations and underscores the strength of the prime segment,which is increasingly defined not only by location,but also by asset quality and specifications.As occupiers adopt a more strategic approach to realestate,they are placing greater emphasis on assets that deliver broader operational value.Higher rents are more easily justified when portfolios contribute to overallbusiness efficiency,through improvements in areas suchas transportation,labour,or supply chain resilience.Mid-yearreview01020314CBRE RESEARCH 2025 CBRE,INC.Intelligent Investment2025 Mid-Year Market Outlook|EUROPEFigure 6:Top European logistics locations real prime rental change(%p.a.)-6%-4%-2%0%2%4%6%8%Real annual rent change20-year real averageFORECASTFigure 5:European logistics take-up and vacancy rateSource:CBRE ResearchSource:CBRE Research0%1%2%3%4%5%6%7%810152025303540Million sq mRolling 12 months take-upVacancy rate(RHS)Offices0516CBRE RESEARCH 2025 CBRE,INC.Intelligent Investment2025 Mid-Year Market Outlook|EUROPEMid-yearreviewOfficesForecastJanuary 2025SUPPLY SIDE SET TO TIGHTENWe expect vacancy to move steadily lower through 2025.This is driven by higher leasing activity,a lack of recent development,and companies growing preference for high quality space a segment of the market where vacancy is already far tighter.As overall availability levels move down more decisively through 2025,vacancy spreads between prime and poorer quality buildings will also widen further.PRIME RENTS TO RISE MORE SLOWLYWhile demand pressure is expected to grow slowly,the scarcity of good,well-located buildings should support some uplift in prime rents in most markets.The market shifts we anticipate are enough to generate overall nominal prime rental growth across Europe of 2.53%in 2025.Most major office markets are expected to see a moderate rise in rents in 2025,generallyof between 24%.For most of the larger cities,this representsa slower rate of growth than in 2024.Office-using employment continued to grow across themain European markets during H1 and is expected to grow by just under 1%in 2025.Although below the long-term average(1.7%),this growth will be positive for demand.Average office attendance rates are stable,but more occupiers are experiencing overcrowding on peak days.Demand softened slightly in the first half of 2025,down 2.5%compared with H1 2024.We now expect a 5%increase in leasing this year,based on slower economic growth expectations and softer take-up data for the first half of the year.SLOW RECOVERY IN LEASING TO CONTINUESupported by an increase in office-using employment andhigher and more stable office attendance rates,we expecta further year of modest recovery in leasing levels.We anticipate that leasing levels will rise by 510%through 2025,edging closer towards historic averages.European office vacancy has not yet started to fall,rising 17bps to 8.67%during H1 as leasing activity fell back slightly.The CBD vacancy rate plateaued while vacancy in less central submarkets continued to trend up,as the gulf between the two widened further.The vacancy rate now stands 5.1%higher outside CBDs(figure 7).Occupiers focus on CBDs,driven by their employees desire for the transport links and amenities often present in those areas,is a persistent theme in the market.We expect aggregate European vacancy to peak at 9%this year as completions continue to decline from the 2021 peak to less than 4.6m sq m for 2025,down from a post-pandemic(20202024)average of 5.2m sq m.CBREs European prime office rent index grew 3.4%in H1,contributing to year-on-year growth of 7.2%.Strong prime rental growth has already been seen this yearin Amsterdam(17.6%),Frankfurt(8.2%),London West End(6.3%),and Paris(4.2%),among others(figure 8).We continue to expect the rate of prime rental growth to be lower than in 2024,but the rental growth already seen in H1,lower vacancy in CBDs,and more occupier interest in those central locations suggests some further rental growth to come this year.We forecast further rental growth in key cities with London West End(12.5%),Rome(10.6%),and Frankfurt(8.2%)are expected to see especially strong rates of growth throughoutthe year as a whole.01020317CBRE RESEARCH 2025 CBRE,INC.Intelligent Investment2025 Mid-Year Market Outlook|EUROPEFigure 7:CBD vacancy spread to rest of city(%)Source:CBRE ResearchNote:Aggregates of 11 major citiesFigure 8:Prime office rental growth 2024-25,selected markets(%)Source:CBRE Research2%3%4%5%6%7%8%9%Non-CBD vacancy rateCBD vacancy rate0%5 %Q1 2025Q2-Q4 2025 forecast20244.2%3.1%5.1%Retail0619CBRE RESEARCH 2025 CBRE,INC.Intelligent Investment2025 Mid-Year Market Outlook|EUROPERetailForecastJanuary 2025LEASING ACTIVITY TO STRENGTHENLeasing activity will accelerate,as retail occupiers realise expansion plans.Steady rental growth is expected across high streets and shopping centres.Availability will remain a challenge in prime locations,however certain occupier types with very large unitswill look to reduce their unit sizes.RETAIL PARKS AND PRIME ASSETSTO OUTPERFORMRetail parks are likely to see stronger rental growth than otherasset types,due to having the strongest occupier demand combined with the lowest vacancy rates.High street locations and shopping centres in the prime segment are also expected to see robust rental growth,however.On an inflation-adjusted basis,wages rose strongly earlyin the year in both the Eurozone and UK.In the UK,this growth persisted despite a spike in April inflation,driven by regulated increases in household bills including energy and water.Retail sales volumes grew robustly in the early part of the year,even as consumer confidence declined in both markets,highlighting a continued disconnect between sentiment and spending.Sales fell in both the UK and Eurozonein May,though look to have improved in June.While France,Spain,and Central and Eastern European economies have seen positive momentum,some weakness persists in Germany,Europes largest economy.While further improvement in both retail sales and wagegrowth is forecast in the remainder of the year,uncertainties around trade policy and inflation present key downside risks and could lead to consumers increasingly focusing on non-discretionary spending.CONSUMER FUNDAMENTALSTO IMPROVE FURTHERConsumer fundamentals are expected to continue to improvein 2025.A steadier increase in disposable income is forecast,while further rate cuts are likely to aid in boosting confidenceand stimulating demand.Global trade and policy uncertainties have had little impact on existing European retailers expanding their portfolios,though new market entrants remain more cautious.Prime high street leasing remains strong,with vacancy rates typically below 5%and rents often achieving above quoted levels.Brands are also committing to longer lease terms.Prime shopping centres show similarly high occupancy,though rental growth is more modest and largely index-linked.Secondary space lags,but discounters are expanding across Europe and are taking space in secondary locations traditionally considered harder to let,helping to drive footfall.We expect continued healthy leasing demand in the remainder of the year,barring any shocks relating to trade policy or the wider macroeconomic environment.However,we also expectthe gulf between prime and secondary space to stay wide.Retail parks saw year-on-year rental growth of 4%in Q2 according to CBREs European Shopping Centres Performance Index,the strongest of all asset types tracked by the index.Our prime European indices show growth of 3.4%for high streets and 2.8%for shopping centres in the same period.Rentalgrowth has been stronger overall in the high street segment following the post-COVID rebasing in rents.Growth is expected to be more moderate in the remainderof the year.We forecast European weighted average prime shopping centre and high street rents to grow by 1.6%this year.Retail parks are expected to continue to outperform due to strong fundamentals.Mid-yearreview01020320CBRE RESEARCH 2025 CBRE,INC.Intelligent Investment2025 Mid-Year Market Outlook|EUROPEFigure 9:Eurozone retail sales volume index(12/2019=100)and consumer confidence balance Source:Eurostat,CBRE ResearchFigure 10:CBRE European retail rent index(Q1 2015=100)and%change per annum Source:CBRE ForecastingNote:Weighted average of top European retail markets,60/40 high street/shopping centre split-35-30-25-20-15-10-507580859095100105110Retail sales volume(LHS)Consumer confidence(RHS)30405060708090100110120-15-10-5051015202530%Change per annum(LHS)Nominal terms index(RHS)FORECASTHotels0722CBRE RESEARCH 2025 CBRE,INC.Intelligent Investment2025 Mid-Year Market Outlook|EUROPEHotelsForecastJanuary 2025REVPAR GROWTH MODERATINGIN KEY TOURISM MARKETSRevPAR growth is expected to moderate but remain healthy across marketsin Europe.Sustained travel demand will continue to support the sector,although some markets in Eastern Europe may face challenges from potential geopolitical tensions.SLOWER GROWTH IN AGGREGATENEW HOTEL SUPPLY Given favourable demand and supply dynamics,hotels in popular tourism markets such as Greece,France,Italy,and Spain are well-positioned to strengthen occupancy and ADR levels,with steady progression projected through 2025.Europes international tourist arrivals remain on a positive trajectory,broadly in line with earlier projections.The U.S.continues to be a key source market,with year-to-date monthly arrivals continuing to exceed 2024 and 2019 levels,though stabilisation is expected going forward.Total air passenger volumes are forecast to rise byc.5%year-on-year in 2025,gradually returning to their longer-term growth path.While some regional slowdowns and downside risks remain,overall momentum remains solid,with steady growth anticipated for the remainder of the year.Travel from Mainland China to Europe continues to recover,though a full return to 2019 levels is now expected in 2026,rather than 2025 as previously projected.STEADY GROWTH IN INBOUND ARRIVALSAND HOTEL STAYS Europe is projected to see higher international tourist arrivals and overnight stays in 2025.The U.S.will remain an important source of hotel demand,though its growth is expected to soften.In contrast,stronger growth momentum is expected from other global markets.Year-to-date 2025 RevPAR across European chain-scale hotels rose by 2.8%year-on-year.Growth was supportedby strengthening occupancy in several key tourism markets,while ADR increases have become more moderate.Earlier concerns over Eastern Europe have generally eased,with Budapest and Warsaw outperforming in both occupancyand room rates.In some markets,the recent stronger uptick in occupancy has been accompanied by what looks like a more measured approach to rate setting,with operators seemingly favouring stable pricing to preserve booking momentum.This suggests a focus on maintaining demand levels,and we expect RevPAR growth across European chain-scale hotels to decelerate from the 2024 level of 7%to still-healthy levels within the range of 2%to 5%.As projected earlier in the year,favourable supply and demand dynamics continue to support growth in key tourism markets,though at a more measured pace.Greece,Italy,Spain,and France have seen further ADR gains at the national level,while occupancy has remained broadly stable compared to the same period last year.This moderation in growth is expected to persist into the second half of the year.The UK and Germany have experienced notable downward revisions in hotel development forecasts,with several projects delayed or remaining on hold at the planning stage.Meanwhile,Ireland,Poland,and Portugal are forecast to see supply growth at a CAGR of over 1tween 2024 and 2030 modest by historical levels,but above the regional average.Mid-yearreview01020323CBRE RESEARCH 2025 CBRE,INC.Intelligent Investment2025 Mid-Year Market Outlook|EUROPEFigure 11:Top ten European countries by inbound overnight arrivals(millions)and forecast growth(%)Source:Tourism Economics,CBRE ResearchFigure 12:European hotel operating performance(12-month moving average,YTD Jun 2024&YTD Jun 2025)Source:HotStats,CBRE Research0 0Pp%0 50 100 150 200 25020172018201920202021202220232024YTD2024YTD2025ADR(LHS)RevPAR(LHS)Occupancy(RHS)5.9%0%5 %0504060801001202025F(LHS)2024-2030(%)Growth(RHS)2025(YoY)ProjectionEurope-wide total inbound overnight arrivals0.5GR 2025-2030Europe-wide hotel pipeline 2.8%Europe-wide RevPAR%Growth YTD Jun 20250.7%Europe-wide ADR%Growth YTD Jun 2025Data Centres 0825CBRE RESEARCH 2025 CBRE,INC.Intelligent Investment2025 Mid-Year Market Outlook|EUROPEData CentresForecastJanuary 2025VACANCY RATES TO HIT HISTORIC LOWSThe vacancy rate in Europe is expected to close at 9%in 2025,a new low.The top 15 European data centre markets combined have traditionally seen a double-digit vacancy rate.However,available space is expected to decline for the fourth consecutive year,given strong demand for capacity and the difficulties providers are having delivering new stock due to the lack of available land and power for data centres in Europe.RENTS WILL CONTINUE TO INCREASEPricing for data centre space suitable for hyperscalersis set to climb by 10%or more in some markets where thereis strong demand,such as Frankfurt and London,in 2025.Prices for new available capacity are expected to jump so providers can account for higher build costs.The shortageof power means that operators with availability can chargea premium rental rate.SIGNIFICANT NEW SUPPLY TO BE ADDED IN 2025Despite a distinct lack of available power,data centre supply across Europes five largest markets is expected to grow bya record 20%year-on-year in 2025.London and Frankfurt are expected to account for 2.5GW of capacity,or approximatelyhalf of the total data centre supply in Europe,by the end of 2025.They are forecast to be 1.3GW and 1.2GW markets,respectively.Most new supply in Europe(70%)will be delivered to the five largest markets FLAPD(Frankfurt,London,Amsterdam,Paris,and Dublin)this year.Nevertheless,there will be seven secondary markets registering over 100MW of supply.Four years ago,there were no secondary markets of 100MW or more.This demonstrates that data centre investment is increasingly diversified in Europe.We forecast that new supply will grow by 17ross Europe year-on-year in 2025,based on our analysis of the 15 top European data centre markets.European average vacancy rates are now projected to decline to 7.6%by the end of this year,having declined to 10%for the first time as of end-2024.This means that since 2020,the average European vacancy rate will have halved.Demand will continue to outstrip supply in most major European markets and vacancy rates will fall further in 2025.Hyperscaler,High-Performance Computing,AI,and requirements from new companies offering GPU servicesand quantum computing will all add to data centre demandin 2025 and beyond,ensuring that vacancy rates will fall to below 6%in FLAPD.Monthly rental rates(excluding power usage costs)have increased in Europe as a result of restrictionsin supply and rising demand.As the number of optionsfor scalable multi-MW capacity are limited,cloud service providers have had to accept an increase in rental rates.Operators have also raised rates,partly to reflect the risein costs to build new data centres.In 2025,more operators are equipping their facilitieswith liquid cooling to accommodate high-density AI workloads,which is another factor in risingrates.010203Mid-yearreview26CBRE RESEARCH 2025 CBRE,INC.Intelligent Investment2025 Mid-Year Market Outlook|EUROPESource:CBRE ResearchFigure 13:European data centre market take-up 2016 2025F(MW)Despite lower availability,demand will hit a new high Although available capacity is on the decline,take-up is expected to reach 854MW in 2025 and exceed new supply in Europe for the third consecutive year.We project that the five largest markets in Europe(FLAPD)willaccount for 75%of take-up across the 15 European markets trackedby CBRE this year.London and Frankfurt,the two largest colocation data centre markets in Europe,will account for more than 40%of the expected take-up.Developer-operators are increasing data centre capacity around the major cities to create more supply.These data centres can be as far as 40km away from some of the largest data centre clusters in the primary markets of Europe.Secondary markets are also advancing The secondary(non-FLAPD)markets are also increasing newsupply as they grow rapidly from a low base.Of all the secondary markets,Milan has combined new supply growth with a rapid increase in take-up,resulting in a decline in forecast vacancy levels to 2.5%by the end of 2025.Although the other secondary markets have higher vacancy ratesthan Milan,nearly all are experiencing a decline in availability.As availability declines in Europe,organisations in need of capacity are deploying in smaller cities as well as the larger,moreestablished markets.Record take-up expected in Europe 0100200300400500600700800900201620172018201920202021202220232024ForecastFrankfurtLondonAmsterdamParisDublinSecondary marketsSustainability0928CBRE RESEARCH 2025 CBRE,INC.Intelligent Investment2025 Mid-Year Market Outlook|EUROPESustainabilityForecastJanuary 2025EVOLUTION OF FINANCING STRATEGIESLending institutions are expected to implement incentivesand strategies aimed at financing retrofitting.There will be considerable variation in local market practices,dependingon the maturity of the market and the robustness of financial institutions.Conversely,in line with their aim of reducing the carbon footprint of financed portfolios,financial institutionswill be selective in approving refinancing for assetsrequiring upgrades.NAVIGATING THE COMPLEXREPORTING LANDSCAPEThe EUs Corporate Sustainability Reporting Directive(CSRD)and the Corporate Sustainability Due Diligence Directive(CS3D),will require companies in scope to publicly disclose their climate transition plans and conduct supply chain due diligence,implementing them to the best of their ability.This reinforces the need for corporates to have a robust transition plan and understanding of supply chain risk to achieve climate goals.Retrofitting existing buildings remains the most frequent choice of action as the improvement of buildings to meet sustainability standards offers a good opportunity for enhancing returns.Most investors already have the funding for sustainability initiatives available,suggesting that thisis often an integral part of the business plan when allocating or raising capital.Commercial property owners and investors are increasingly experiencing a heightened risk premium on properties susceptible to climate-related events,irrespective of individual property exposure.THE COST OF CLIMATE RISKInvestors will have to publicly disclose and implement their climate transition plans aimed at retrofitting assets to alignwith the Net Zero Carbon Pathway,as mandated by European legislation.Additionally,investors must address the financial implications associated with the adaptation to prospective climate-related risks.Many financial institutions and several national banks now use the EU taxonomy(EUT)as the benchmark for green loans and investments.Assessment of full and partial alignment with the current,and,when applicable,revised taxonomy,helps real estate assets and funds drive more sustainable investments in a low carbon economy,even on a voluntary basis.According to our 2025 European Lender Intentions Survey,sustainability is increasingly emerging as a pivotal consideration in financing decisions.Nearly half of the surveyed lenders stated that they are implementing minimum asset-level criteria related to sustainability as a prerequisite for new lending activities or require business plans for assets failing to meet these criteria.In a move designed to reduce administrative burdenon companies,the European Commission proposeda Sustainability Omnibus package.The revised European Sustainability Reporting Standards(ESRS)are set to substantially reduce the number of required metrics and qualitative disclosures.The interplay between the Omnibus package andpolitical decision-making in the U.S.creates a climate of uncertainty that hampers the execution of sustainability strategies.The pullback by the U.S.from climate initiatives present opportunities,with European markets potentially attracting more capital from sustainability-conscious investors.Mid-yearreview01020329CBRE RESEARCH 2025 CBRE,INC.Intelligent Investment2025 Mid-Year Market Outlook|EUROPEFigure 14:In what ways do sustainability criteria influence lending on real estate?Source:European Lender Intentions Survey,CBRE Research,June 2025Figure 15:How much of a margin decrease are lenders willing to offer for assets that meet certain sustainability criteria?Source:European Lender Intentions Survey,CBRE Research,2024 and 2025111BEG%0 0P%OtherMargin increase if an asset does not meet certainsustainability criteriaMargin stepdown should an asset meet certainsustainability criteriaMore favourable loan terms where an asset meetscertain sustainability criteriaBusiness plans needed where assets do not meetcertain sustainability criteriaWill not lend if an asset does not meet certainsustainability criteria4(A%9F#%5%0 0P%UnsureMinor stepdown(20 bps)2024202571%of lenders will not lend against assets that do not meet sustainability criteria or have a business plan to improve it Copyright 2025.All rights reserved.This report has been prepared in good faith,based on CBREs current anecdotal and evidence based views of the commercial real estate market.Although CBRE believes its views reflect market conditions on the date of this presentation,they are subject tosignificant uncertainties and contingencies,many of which are beyond CBREs control.In addition,many of CBREs views are opinion and/or projections based on CBREs subjective analyses of current market circumstances.Other firms may have different opinions,projections and analyses,andactual market conditions inthe future maycause CBREscurrent viewsto later beincorrect.CBREhasno obligation to update itsviewshereinifits opinions,projections,analyses ormarket circumstances laterchange.Nothing in this report should be construed as an indicator of the future performance of CBREs securities or of the performance of any other companys securities.You should not purchase or sell securitiesof CBRE or any other companybased on the views herein.CBRE disclaims all liability forsecurities purchased or sold based on information herein,and by viewing this report,you waive all claims against CBRE as well as against CBREs affiliates,officers,directors,employees,agents,advisers and representatives arising out of the accuracy,completeness,adequacy or your use of theinformationherein.Kevin RestivoDirector,Data Centre Solutions Consulting,EKeith BreedAssociate Director,Data Centre Solutions Consulting,EDragana MarinaSenior Director,Head of Research&Data Intelligence,Denmark and Sustainability Research Lead,Continental EAlex OzgaAssociate Director,Retail&Logistics Research,EFraser DaisleyAssociate Director,Office Research,EMilan PotgieterAnalyst,Office Research,ERonald ChanAssociate Director,Hotels Research,ERaphael RietemaSenior Director,Capital Markets Research,EBenjamin PipernosSenior Analyst,Capital Markets Research,Europebenjamin.pipernoscbre.frFrank VerwoerdHead of Research,The Netherlands andEuropean Thought Leadership Lead LPol MarfDirector,Retail&Logistics Research,EEuropean ResearchTasos VezyridisExecutive Director,Head of Research,UK&I and Continental ERuth HolliesSenior Director,Head of European FDaniela DeanSenior Analyst,Global RContacts Copyright 2025.All rights reserved.This report has been prepared in good faith,based on CBREs current anecdotal and evidence based views of the commercial real estate market.Although CBRE believes its views reflect market conditions on the date of this presentation,they are subject tosignificant uncertainties and contingencies,many of which are beyond CBREs control.In addition,many of CBREs views are opinion and/or projections based on CBREs subjective analyses of current market circumstances.Other firms may have different opinions,projections and analyses,andactual market conditions inthe future maycause CBREscurrent viewsto later beincorrect.CBREhasno obligation to update itsviewshereinifits opinions,projections,analyses ormarket circumstances laterchange.Nothing in this report should be construed as an indicator of the future performance of CBREs securities or of the performance of any other companys securities.You should not purchase or sell securitiesof CBRE or any other companybased on the views herein.CBRE disclaims all liability forsecurities purchased or sold based on information herein,and by viewing this report,you waive all claims against CBRE as well as against CBREs affiliates,officers,directors,employees,agents,advisers and representatives arising out of the accuracy,completeness,adequacy or your use of theinformationherein.Global Research LeadershipHenry Chin,Ph.D.Global Head of RJulie WhelanGlobal Head of Occupier Thought Leadership&Research CAda Choi,CFAHead of Research,Asia PContactsDennis Schoenmaker Ph.D.Co-Head Global Forecasting&AnalyticsGlobal Research,Econometric AKasia Dziewulska Co-Head Global Forecasting&AnalyticsGlobal Research,Econometric A Copyright 2025.All rights reserved.This report has been prepared in good faith,based on CBREs current anecdotal and evidence based views of the commercial real estate market.Although CBRE believes its views reflect market conditions on the date of this presentation,they are subject tosignificant uncertainties and contingencies,many of which are beyond CBREs control.In addition,many of CBREs views are opinion and/or projections based on CBREs subjective analyses of current market circumstances.Other firms may have different opinions,projections and analyses,andactual market conditions inthe future maycause CBREscurrent viewsto later beincorrect.CBREhasno obligation to update itsviewshereinifits opinions,projections,analyses ormarket circumstances laterchange.Nothing in this report should be construed as an indicator of the future performance of CBREs securities or of the performance of any other companys securities.You should not purchase or sell securitiesof CBRE or any other companybased on the views herein.CBRE disclaims all liability forsecurities purchased or sold based on information herein,and by viewing this report,you waive all claims against CBRE as well as against CBREs affiliates,officers,directors,employees,agents,advisers and representatives arising out of the accuracy,completeness,adequacy or your use of theinformationherein.Kenneth HattonHead of Hotels,EAndrew JayHead of Europe Data Centre SLudovic ChambeHead of Sustainability,Continental EDr.Carl G.DeppischHead of Industrial&Logistics Occupier,EJeremy EddyHead of Living,EChris GardenerHead of Retail,EDavid CloseExecutive Director,Head of Occupier Retail,EBusiness ContactsChris BrettHead of Capital Markets,EAnna EstebanHead of Leasing and Occupier Accounts,ENick HendyHead of Office Investment Properties,EJack CoxManaging Director,Industrial&Logistics,EContacts
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