NEWS

European Real Estate & Digital Infrastructure: Year-End Outlook 2025

As we’re nearing the close 2025, the European real estate and digital infrastructure landscape presents a fascinating paradox: structural demand drivers remain robust whilst capital allocation has grown notably more selective. For those of us placing senior leadership across these sectors, understanding this duality proves essential.

The Digital Infrastructure Imperative

The AI revolution has fundamentally altered datacentre requirements. “Hyperscale” seems no longer a sufficient description; we’re now seeing €500 million-plus investments in AI-capable campuses requiring 100+ megawatts. Edge computing continues its inexorable expansion, driven by latency-sensitive applications and data sovereignty requirements. The sector’s most sophisticated investors have committed substantial capital, yet talent capable of executing these complex developments remains limited.

Commercial Real Estate’s Evolution

The office sector’s “flight to quality” has crystallised into reality. Prime, ESG-compliant buildings in major cities—London, Paris, Munich, Amsterdam—see steady demand and compressed yields. Meanwhile, secondary stock faces existential questions around obsolescence, creating demand for asset management leaders who understand both physical transformation and occupier requirements.

Retail has undergone its own remarkable transformation. The “retail apocalypse” narrative has given way to nuanced reality: dominant shopping centres and prime high streets in major European cities demonstrate resilience, whilst weaker schemes face repurposing challenges. Successful retail landlords have evolved into experiential destination managers, integrating F&B, leisure, and community spaces. The sector now requires leadership combining traditional asset management with hospitality, digital integration, and placemaking expertise. Meanwhile, retail parks serving convenience needs have proven surprisingly durable, benefiting from click-and-collect dynamics.

Logistics remains relatively resilient, though the post-pandemic frenzy has moderated. Last-mile facilities near major conurbations continue attracting institutional capital, whilst cold storage and automated warehousing present niche opportunities requiring operating partners who understand technology integration.

Liberation Day’s Reverberations

President Trump’s April tariff announcements created immediate market volatility, though European real estate has seen renewed investor interest. More significantly, the tariff regime has nudged European industrial policy independence, particularly around semiconductors and advanced manufacturing, translating into demand for industrial facilities and R&D campuses.

The geopolitical shift has also reinforced data sovereignty concerns, benefiting European datacentre operators and creating opportunities in digital infrastructure across the Continent.

Capital Markets Reality

Debt markets have recalibrated fundamentally. Lenders scrutinise income sustainability and ESG credentials rigorously. This environment favours experienced CFOs and Heads of Capital Markets who maintain long-standing banking relationships and understand structured finance.

Private equity remains active but disciplined, targeting operational value-creation rather than leverage-driven returns. This demands management teams combining financial acumen with genuine operational expertise.

Looking Towards 2026

Will 2026 provide an inflection point for price discovery? Are we at realistic expectations for both buyers and sellers for these to converge?  The “vintage advantage” seems to be a positive theme to which many are warming.

This environment creates extraordinary demand for multifaceted leadership. Asset managers must demonstrate surgical precision on cash flow optimisation—every lease event, every service charge recovery, every capex decision scrutinised for yield impact. Simultaneously, disposal expertise becomes paramount as portfolios are pruned of non-core assets. Those who can extract maximum value whilst managing returns expectations will prove invaluable.

Conversely, acquisitions professionals with capital to deploy face a target-rich environment, provided they possess the analytical rigour to underwrite secondary assets and the operational vision to execute value-add strategies.

The winners in 2026 will be organisations combining patient capital with management teams capable of both defensive asset management and opportunistic acquisition.