How have unpredictable US trade policies impacted European real estate?

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Unpredictable US Trade Policy Contributes to Sluggish European Real Estate Activity

Unpredictable US trade policy has been identified as a contributing factor to the subdued activity within Europe's commercial real estate market. This uncertainty, alongside other market dynamics, has tempered hopes for a recovery, despite expectations at the start of 2025 for an end to a three-year pandemic-induced downturn.
Impact on Investor Caution and Sales Activity

The uncertainty stemming from US trade policy has amplified investor caution, leading to a significant reduction in property sales. This caution has been a primary driver behind the near-decade lows in commercial property sales across Europe. For instance, year-on-year commercial property sales in Europe were flat in the first quarter of 2025, reaching €47.8 billion, which is less than half the volume seen three years prior, according to MSCI data.
Broader Market Conditions Affecting Recovery

Beyond trade policy, other factors have hindered a market recovery. These include a preference for stronger returns in alternative private markets and sellers' reluctance to accept lower prices, as noted by industry executives. Early indicators for the second quarter of 2025 suggest continued weakness, with cross-border investment into property in Europe, the Middle East, and Africa falling by approximately one-fifth compared to the previous year, marking the worst April-June period in a decade, according to Knight Frank citing preliminary MSCI data.
Sector-Specific Challenges and Investment Flows

The sluggish sales environment has affected most property sectors, including offices and even data centres, which were previously a strong performer. The under-supplied rental housing market remains an exception, continuing to draw interest. However, assets such as out-of-town offices and older shopping malls are struggling to find buyers. This is further evidenced by the significant disparity in fundraising between private credit and real estate funds in Europe during the first half of 2025, with private credit funds raising US$39.9 billion compared to US$20.6 billion for real estate funds, as reported by Preqin.

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How have unpredictable US trade policies impacted European real estate?

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