European Property Sales Reach Three-Year Low

Europe's commercial property market is experiencing renewed pressure as rising borrowing costs discourage transactions, complicate refinancing and force investors to reconsider asset valuations. Data released on 29 October showed property sales falling to €43 billion during the third quarter, their lowest level in three years, highlighting the continued difficulties facing the region's real estate industry.

According to property data provider MSCI, European commercial property transaction volumes declined 3% during the first nine months of 2026 compared with the already subdued performance of 2025. Office property sales have fallen to their lowest level since the 2009 financial crisis, reflecting persistent uncertainty over occupier demand and investment returns. Meanwhile, higher government bond yields have increased financing costs, prompting some investors to renegotiate proposed purchases at discounts exceeding 10%.

The deterioration is affecting major property owners and investment managers. German asset manager DWS recently restricted withdrawals from one of its open-ended property funds, while residential landlord Vonovia acknowledged that higher interest rates were affecting transactions and announced a review of its development operations. Both developments demonstrate the difficulties of managing real estate investments when borrowing becomes more expensive and asset sales take longer to complete.

The downturn has also exposed differences between property sectors. Well-located logistics facilities and certain residential assets continue to attract institutional interest, while older office buildings face greater valuation pressures. For investors, the principal challenge is determining whether current prices adequately reflect financing costs and future rental income. The latest figures suggest that Europe's commercial property recovery remains vulnerable to further increases in interest rates and prolonged uncertainty over asset values.