Real estate investors in Europe hold back amid tariff turmoil
Commercial property sales were down 10 per cent by value in the second quarter and down 7 per cent in the first half of the year, according to data from MSCI. The number of active buyers and sellers in Europe also fell to the lowest level in more than a decade during the three months to June.
US-headquartered investors were conspicuously quiet, with deals dropping by 29 per cent year on year in the first half of the year, according to MSCI's data, which tracks sales worth five million euros (S$7.4 million) or more. US funds such as TPG, Starwood, KKR and Ares were big buyers of European real estate in 2024.
Blackstone, which is often a top buyer of European real estate, was ranked sixth by MSCI so far this year, behind the likes of Singapore's GIC, Norges Bank Investment Management and LondonMetric Property.
'The uncertainty that followed US tariff announcements in April meant it was natural some investors would pause from making real estate deals while they waited for clarity,' said Tom Leahy, head of real estate Emea research at MSCI. 'In contrast to the volatility in equity markets, real estate's illiquidity means lower deal volumes are often the first response to external shocks.'
There were some bright spots, such as signs that Japanese investors are turning from the US to Europe. Japan-based buyers reached a record number of deals at the same time that Japanese investment into US real estate dropped by 45 per cent year on year.
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Australian superannuation funds have also been active. Aware Super has deployed about £500 million (S$858 million) into London offices via its joint venture with Delancey.
However, data is yet to show a material increase in deployment by Canadian investors, said Leahy. 'I don't think we can yet tell a story that Canadians are fleeing America for Europe. The data doesn't support that yet, although it has been a topic in the market.'
The UK has retained its position as the largest market in Europe, even as deal-making in the country slowed. Volumes dropped by 14 per cent year on year in the first half, compared to a 15 per cent rise in Germany, an 11 per cent rise in Sweden.
While the French market was flat overall, there were signs of returning interest in its offices. Sales in the sector reached 3.1 billion euros in the first half of the year, with activity concentrated in Paris.
The city's La Defense district saw more than 600 million euros of property changing hands, compared to around 200 million euros in 2023 and 2024. Blackstone is set to buy the Trocadero office building in central Paris for around 705 million euros, while Gecina has bought the Solstys complex from DekaBank for 433 million euros.
Fundraising continues to be tough, with MSCI Private Capital Solutions data showing that investors committed very little to new equity funds in the first quarter of 2025.
'In general, it's been difficult because real estate has underperformed other private assets,' said Leahy. 'The transaction market has also been very slow, and that means that investors aren't getting their money back from prior fund vintages, so distributions have fallen substantially.' BLOOMBERG
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