After nearly three years of stalled decisions and defensive positioning, Europe’s private real estate market is moving again. Not with the confidence of the pre-2022 cycle, but with enough intent to show that capital is no longer paralysed by uncertainty. Fundraising has resumed in a market that has largely accepted higher financing costs, tighter regulation, and slower exits as structural conditions rather than temporary disruption.
In 2025, Europe-focused private real estate funds raised an estimated €65–70 billion. By historical standards, that is not a boom. What matters is the behavioural shift behind the number. Investors who spent much of the past two years waiting for clarity are now committing capital where risk can be priced with discipline and where outcomes feel bounded rather than open-ended.
Capital returned but only to the biggest platforms
The recovery in European fundraising has been narrow. Capital has flowed primarily to large, established managers with long track records, diversified portfolios, and proven access to financing across multiple jurisdictions. For institutional investors, the last downturn reinforced a simple lesson: scale and balance-sheet strength matter most when markets turn illiquid.
Smaller and mid-sized managers continue to face long and difficult fundraising processes. This reflects not a lack of capital, but a lack of tolerance for execution risk. Investors are not expressing renewed faith in European real estate as an asset class. They are expressing confidence in specific platforms capable of managing refinancing pressure, regulatory complexity, and extended holding periods.
Stability unlocked capital before deals returned
What ultimately changed investor behaviour was not the prospect of cheaper money, but the stabilisation of financing assumptions. Between 2022 and 2024, Europe’s real estate market suffered less from high interest rates than from their unpredictability. Rapid repricing undermined underwriting, widened bid-ask spreads, and made investment committee approvals difficult even where assets appeared attractively priced.
By 2025, borrowing costs remained elevated, but expectations stabilised. Lenders behaved more consistently, valuation gaps narrowed, and underwriting regained credibility. This allowed investors to approve commitments even as transaction volumes remained subdued. Fundraising moved first, reflecting a belief that the most disruptive phase of repricing had already passed.
Opportunistic strategies moved first
The composition of capital raised across Europe shows where conviction is strongest. Opportunistic and value-add strategies captured the largest share of new commitments, reflecting the view that repricing has created opportunities, but only in specific parts of the market.
Distress in Europe is uneven rather than systemic. Secondary offices, assets facing heavy energy-efficiency capital expenditure, and properties approaching refinancing cliffs remain under pressure, creating entry points for well-capitalised buyers. At the same time, logistics, rental housing, student accommodation, and selected hospitality assets continue to benefit from structural undersupply and resilient demand.
Investors are not positioning for a broad recovery. They are backing managers capable of operating in a fragmented environment and pricing risk asset by asset rather than relying on cyclical uplift.
Regulation became a valuation driver
Unlike previous cycles, Europe’s real estate reset is inseparable from regulation. Energy-performance standards and sustainability requirements now directly affect valuations, financing availability, and exit liquidity.
Buildings that cannot realistically meet future efficiency thresholds face higher capital expenditure, restricted lender appetite, and persistent valuation discounts. Funds specialising in retrofitting, repositioning, or acquiring already-compliant stock are therefore attracting stronger investor interest. For European limited partners, sustainability has shifted from a policy preference to a balance-sheet risk.
Digital infrastructure pulled capital into real estate
Another driver of Europe’s fundraising recovery has been the expansion of what investors now classify as real estate. Data centres, fibre networks, and related digital infrastructure assets are increasingly treated as part of real estate allocations rather than pure infrastructure.
Europe’s push for data sovereignty, cloud capacity, and AI-ready infrastructure has supported large fundraises in this segment. For investors cautious about traditional office exposure but still committed to real assets, digital infrastructure offers long-duration demand, contractual income, and strategic relevance. Its rise has widened the funnel of capital flowing into European real estate at a time when conventional commercial sectors remain under pressure.
Liquidity discipline reshaped investor behaviour
A quieter but decisive factor behind the fundraising upswing is renewed focus on liquidity discipline. After several years of stress across private markets, European investors are far more sceptical of structures that promise flexibility without delivering it.
Traditional closed-end real estate funds, despite their long horizons, offer clarity. Investors can assess leverage, refinancing risk, deployment pace, and exit assumptions without relying on optimistic liquidity narratives. As valuation volatility eased, this transparency allowed real estate to re-enter institutional portfolio models as a controlled, long-term allocation rather than a growth story.
What the recovery actually signals
Europe’s fundraising recovery does not mark a return to aggressive risk-taking. It reflects a market that has accepted slower exits, higher refinancing costs, and heavier regulation as permanent features. Capital is returning not because conditions have improved dramatically, but because investors believe the boundaries of risk are now visible.
The real test lies ahead. If transaction volumes recover in 2026, the capital raised over the past year will underpin a new acquisition phase shaped by regulation and balance-sheet discipline. If refinancing pressure persists and exits remain constrained, fundraising may still continue, but only for managers able to operate with patience, flexibility, and deep operational control. Europe’s real estate market has not revived. It has entered a more selective and conditional phase, where capital is willing to act again, but only on terms it can fully justify.
