The mood: cautious, not catastrophic
To be clear, no one at MIPIM was predicting an industry collapse. What I picked up on was a market in transition. Some sectors are stabilising, while others are still struggling to find their footing. The key takeaways?
- Geopolitical and economic uncertainty is making investors wary. Many are waiting for more clarity before making major moves.
- UK commercial property is finding its feet, but growth is selective. Prime office spaces and logistics are holding strong, while secondary assets remain under pressure.
- Germany’s real estate market is still in trouble. Investment volumes have hit their lowest levels since 2010, though policy changes could help long-term.
- The absence of major deal announcements suggests investors are still in wait-and-see mode.
UK commercial real estate: Stability, but at a price
Despite the cautious atmosphere, the UK market is showing signs of stabilisation. That said, it’s not all smooth sailing. The UK office sector remains deeply divided. At one end of the spectrum, prime office spaces in London’s West End are commanding record rents of over £100 per square foot. At the other, secondary office locations continue to struggle with high vacancy rates, as hybrid working reshapes demand.
Retail and logistics, meanwhile, are showing selective resilience. Investors are focusing on assets that align with shifting consumer behaviour - think last-mile logistics rather than big shopping centres.
Germany: A market under strain, but is a turnaround coming?
If the UK is experiencing cautious optimism, Germany is still deep in the trenches. Once again, I will be moderating the annual Real Estate Investment Day in Frankfurt in a few weeks time - so it’s a market I follow closely. The country’s commercial real estate market hit its lowest investment levels in over a decade in 2024.
Non-performing commercial real estate loans in Germany jumped 56% year-on-year, hitting €9.7 billion in 2023 and the NPL ratio for German CRE loans reached 4.47% in Q3 2024, signalling continued distress.
At the same time, Frankfurt and Berlin are struggling with weak demand for office and retail space.
But not all hope is lost. Research suggests that if fiscal policy shifts support consumer spending, Germany’s broader economy could start recovering. And with interest rate spreads narrowing between the US and Europe, foreign capital could find its way back into German real estate and recent research suggests that the country could be on the road to recover, with predictions that economic growth might double to 2% by 2026 - if policy changes go in the right direction.
A market in transition, not freefall
MIPIM 2025 didn’t deliver the flurry of big deals some had hoped for, but it did provide clarity on where the market stands.
- Global uncertainty is keeping capital cautious, meaning investors will likely continue waiting for greater clarity before making bold moves.
- UK commercial property is stabilising, but investors are highly selective.
- Germany’s challenges aren’t disappearing overnight, but policy shifts could offer a path forward.
So, what happens next? That depends on how quickly interest rates adjust, whether governments take proactive fiscal measures, and how investor sentiment evolves.
For now, caution remains the name of the game.
