In 2025, the issue of illiquid assets in real estate is becoming increasingly relevant amid inflationary pressures, rising interest rates, and shifting demand. Investors and developers across Europe are facing challenges when trying to sell or revalue their properties. In this article, we explore how big the illiquidity problem really is, which sectors are most affected, and how to manage this growing risk.
What Are Illiquid Real Estate Assets?
An illiquid asset is a property that cannot be sold quickly and without a significant loss in value. Factors contributing to illiquidity include:
- Poor or remote location
- Lack of buyer interest
- Outdated or specialized use
- Overpricing or weak infrastructure
📌 Unlike liquid assets, illiquid real estate may remain on the market for months or even years, especially in times of uncertainty.
Where Is the Problem Most Visible in Europe?
🏢 Commercial Real Estate
Office space across Europe is facing significant pressure. Cities like Frankfurt, Paris, and Milan are seeing vacancy rates rise by 15–25% compared to 2019 due to the rise of hybrid and remote work models.
- Frankfurt: prime offices down from €9,000/m² to €6,800/m²
- Paris: from €10,500/m² to €8,000/m²
🌍 Regional and Secondary Cities
In Eastern and Southern Europe—Bulgaria, Romania, Croatia—commercial buildings outside capitals are being sold at €1,000–1,200/m², but average time on market exceeds 12–18 months.
🏖 Tourist-Oriented Properties
Seasonal assets like holiday apartments or aparthotels are losing appeal among investors.
Example: built at €1,800/m², but sell for only €1,100–1,200/m² due to weak off-season demand.
How Does Illiquidity Impact Investors?
- 💸 Loss of value on sale: Discounts can reach 30–40% for illiquid properties
- ⌛ Tied-up capital: Inability to release funds for better opportunities
- 🧾 Financial risk: Increased likelihood of debt default or difficulty refinancing
- 📉 Lower portfolio performance: Harder to exit poor-performing assets
2025 Property Prices by Type and Region
| Country | Property Type | Average Price €/m² | Notes |
|---|---|---|---|
| Germany | Regional office buildings | 1,600–2,000 | High vacancy rates |
| France | Shopping centers | 1,800–2,200 | Declining footfall in non-core areas |
| Spain | Suburban apartments | 1,200–1,500 | Long time on market |
| Poland | Warehouses | 900–1,300 | Oversupply in logistics parks |
| Italy | Coastal resorts | 1,000–1,400 | Heavily dependent on seasonal demand |
Risk Mitigation Strategies
✅ 1. Analyze Liquidity Before You Buy
- Look at average time to sell for similar properties
- Assess local market activity, not just price per square meter
✅ 2. Diversify Your Portfolio
- Mix residential and commercial assets
- Invest in different countries and cities
✅ 3. Focus on Income-Producing Assets
Even illiquid assets can perform well if they generate consistent returns:
- 5–7% annual yields for residential rentals
- 6–9% annual yields for logistics or light industrial spaces
Conclusion
The illiquidity problem in real estate is very real across Europe in 2025. The gap between highly liquid, in-demand city apartments and struggling office buildings or regional commercial assets continues to grow.
📊 Liquidity is just as important as price and yield.
Investors who assess liquidity risks and build flexible portfolios will be better equipped to weather market volatility.
