European real estate transaction volumes declined 10% in the first half of 2026 compared with the same period last year, according to the latest research from MSCI (Morgan Stanley Capital International), IPE Real Assets reported.
MSCI’s latest study showed that industrial property investment in Europe fell to its lowest first-half level since 2017, while office activity remained at roughly half the pace of the previous market cycle. Apartments were the only major sector to see strong growth in H1, supported by UK student housing consolidation and demand in the Netherlands and Spain.
Spain was a standout market, with apartment investment rising 400% year-on-year due to major portfolio deals. Meanwhile, completed office and retail transactions in the UK fell to their lowest first-half levels on record, while ongoing structural challenges in Germany’s property market continued to weigh on investment activity, MSCI noted.
Cross-border investment into Europe has fallen to its lowest level since 2013, with U.S. investors remaining the biggest source of capital, increasingly weighing opportunities in Asia-Pacific and AI-related investments. Asian investment also declined sharply, with acquisitions in H1 2026 down nearly 65%, despite the first major South Korean purchase since 2022.
MSCI found that London office investment was slightly lower than in H1 2025, even with major deals. Rising borrowing costs pushed office yields higher, with central London yields exceeding 6% for the first time since 2024.
Despite the rise in yields, the gap between central London office yields and 10-year gilt yields remains around 100 basis points, below the long-term average. MSCI said this could indicate further upward pressure on yields in the second half of the year. Paris office investment activity also declined by around 20% compared with H1 2025.
Tom Leahy, head of EMEA real assets research at MSCI, said the European real estate market remains between improving confidence and repeated external disruptions, keeping overall deal volumes subdued. However, activity is not weak across all sectors, with UK and Spanish apartments, Italian retail, and Spanish offices outperforming due to strong demand and structural growth drivers. He added that investors remain active but highly selective, with Spain highlighting how strong economic conditions and an open property market can attract capital.
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