- Concerns over deglobalization have more than doubled in the last two years
- Artificial intelligence is driving change across the entire real estate value chain
- London, Madrid, Paris, Berlin, and Amsterdam remain the top five most attractive European cities for investment and development
- Warsaw continues to lead Central and Eastern Europe, ahead of Prague and Budapest, underscoring the resilience of the Polish market despite regional geopolitical tensions
Amid a significant surge in concern among European real estate leaders over the effects of deglobalization, recovery prospects for investment activity remain limited due to ongoing geopolitical and economic uncertainty. According to the latest Emerging Trends in Real Estate® Europe 2026 report published by PwC and the Urban Land Institute (ULI), sentiment across the sector has shifted from cautious optimism to pragmatic realism. Warsaw – as the only Central and Eastern European city in the top-ranking group – continues to confirm its status as a mature market, attracting increasing levels of foreign capital.
The share of industry leaders concerned about the impacts of deglobalization has more than doubled in two years, now reaching 70%. Meanwhile, 90% of those surveyed point to rising political instability worldwide (including Europe), 86% to escalating global conflicts, and 77% to weak economic growth prospects across Europe. In this climate of uncertain economic recovery, uneven tenant demand, concerns over construction costs and resource availability, as well as regulatory pressures, business confidence among European leaders has declined slightly (to 45% from 50% a year earlier). However, expectations of improved profitability by the end of 2026 have risen from 46% to 50%.
Changing Capital Flows Amid High Interest Rates
Geopolitical and economic uncertainty is affecting capital allocation strategies. With interest rates remaining high, core real estate assets now face strong competition from other asset classes such as infrastructure and bonds. The gap between seller price expectations and achievable returns persists, though it is gradually narrowing.
In this context, more capital is flowing through the “debt route,” which offers a more attractive risk-return profile than traditional equity investments, particularly in the core segment. The share of entrepreneurial capital sources – including private equity, high net worth individuals, and European and U.S. family offices – is also rising.
“This year’s report reveals a resilient industry still grappling with uncertainty around recovery and a range of operational and investment challenges. We see leaders shifting from quiet optimism toward a more practical approach aligned with current market conditions,”
said Simon Chinn, VP of Research and Advisory at ULI Europe.
“At the same time, there are clear opportunities for the sector: from innovation and diversification to leadership – though we also note a concerning shift in sentiment around sustainability, even as decarbonization remains high on the agenda.”
Gareth Lewis, Partner at PwC, added:
“The report shows that Europe’s real estate sector is navigating a difficult but transformational phase, as many previously favorable conditions no longer apply. Even so, optimism remains high – with many leaders seeing this as an opportunity to redefine the sector’s role in a changing economic landscape.”
Top Cities and Emerging Sectors
With growth prospects varying widely across Europe, country selection is increasingly decisive for investors. Priority is given to mature markets with high liquidity, strong economic fundamentals, and robust democratic and legal institutions.
The Emerging Trends in Real Estate® Europe 2026 ranking identifies London, Madrid, Paris, and Berlin as Europe’s most attractive cities for real estate investment and development for the fourth year running, which is also reflected in transaction volume data from MSCI. German cities remain popular but have dropped several places due to the country’s economic uncertainty – especially regarding open-ended real estate funds. However, they are still regarded as stable and resilient markets, particularly in the residential and logistics sectors. Berlin remains the strongest city in Germany thanks to its liquidity and international appeal.
Amsterdam jumped one place to fifth. Milan held onto seventh, and Barcelona re-entered the top 10 at eighth.
To diversify geographically and sectorally, investors are increasingly turning to niche, operational sectors. While still smaller in volume compared to traditional offices, sectors such as data centers, energy infrastructure, and student accommodation are gaining traction – benefiting from long-term demographic, digital, and decarbonization trends.
“We are at a fascinating, though challenging moment for real estate. The scale of structural change presents unprecedented opportunities for Europe – from supporting energy transition and digitalization to strengthening defense and science ecosystems,”
said Lisette van Doorn, CEO of ULI Europe.
“In the short term, however, uncertainty persists. Success will favor those who understand real estate fundamentals, actively manage assets, collaborate with users, and take a long-term view on value creation.”
AI on the Rise
Artificial intelligence is one of the sector’s fastest-growing disruptors: 75% of respondents are already using AI or machine learning solutions, up from 51% a year earlier. Over the next 18 months, most plan to adopt AI in marketing and leasing (90%), property management (87%), planning and design (84%), and operational or asset management (86%).
ESG: Between Long-Term Goals and Short-Term Pressure
Decarbonization remains a key priority. However, perceptions around ESG are shifting: there is rising criticism of excessive regulation, bureaucracy, and even the term “ESG” itself. Nearly half of respondents have modified their strategies due to economic uncertainty. Asset managers face growing pressure to demonstrate the direct link between ESG and investment value.
Currently, 85% of respondents view ESG as very or somewhat important (down from 89% last year), and those who see ESG as a top investment decision driver over the next five years have dropped from 40% to 21%.
The report also explores how real estate can enhance Europe’s competitiveness – especially in supporting the continent’s technological transformation through skills development, resilience, mobility, and innovation.
Poland and Warsaw: A Stable Market in an Uncertain Region
This year’s report again recognizes Poland as one of the most resilient real estate markets in Central and Eastern Europe. Warsaw maintains its position as the regional leader, ranking 12th among 32 cities in terms of investment and development prospects – ahead of Prague (23rd) and Budapest (29th). The city is increasingly seen as a key market for pan-European investors.
With high yields, a mature real estate structure, stable legal and economic conditions, and a growing base of international tenants, Warsaw continues to demonstrate strong fundamentals. Despite geopolitical tensions in the region, Poland maintains solid macroeconomic indicators: low unemployment, healthy debt leverage, and a balanced supply-demand dynamic.
Analysts from PwC and ULI note that investors increasingly see Warsaw as comparable to Western European cities in terms of transparency, liquidity, and sector professionalism. The city also remains attractive for family offices and value-add funds seeking long-term asset growth.
“Warsaw is strengthening its role as the most mature investment market in Central and Eastern Europe, combining economic stability with rising institutional depth. For global capital, it offers the right balance between investment security and real growth potential,”
said Marcin Juszczyk, Chair of ULI Poland.
Source: CEO.com.pl
