Improved sentiment to drive recovery this year

Key takeaways for 2026

• Prime offices to lead strong returns in next five years
• UK to deliver the best average returns over same period
• Compelling opportunities in German residential markets

How do you assess the sector’s current state as we enter 2026?

The European real estate sector continues to show encouraging signs of recovery. Solid occupier fundamentals, accretive debt funding, and improved manager sentiment are key factors supporting this trend, and will likely lead to a tangible improvement in investment volumes in 2026. Value adjustments are now broadly behind the sector, but with common ground still to be found on the value-add side of the risk spectrum.

Our recently published 2026 European outlook research forecasts that the combined impact of market rental growth and yield tightening will drive prime European real estate returns to 8.4% a year over the next five years, led by prime offices (9.3%), and with the UK expected to deliver the best average returns at 10.3% per annum.

What key transaction or milestone stood out for your business in the past 12 months, and why did it matter?

AEW was an early mover in the life sciences sector with the acquisition of an asset in Copenhagen in 2021. In 2025, it marked another significant milestone with our first life sciences investment in Germany by acquiring a c10,900 sq m asset in Munich for EUROCORE, AEW’s open-ended pan-European core fund. This is a Grade A asset featuring modern and flexible office and highly efficient laboratory spaces across a six-storey building, fully let to three leading international life sciences companies.

This is a significant transaction for AEW and for EUROCORE, capitalising on the growing life sciences sector in Germany through a disciplined approach. Strong industry fundamentals are driving increasing tenant demand for modern spaces situated in established life science and biotech hubs, underscoring the strategic importance of this acquisition.

What are the main opportunities and prospects you see for the sector and for your business in 2026?

In 2026, we see continued opportunities within the German residential market, characterised by a significant housing shortage. Our ambition is to continue growing our activities in this sector, responding to demand for high-quality living assets that meet sustainability standards. In 2024, AEW acquired a 255-unit residential portfolio comprising seven assets in Frankfurt on behalf of a separate account core mandate for a German investor.

Prime offices present another opportunity, particularly in the value-add space, where assets in attractive locations can be refurbished to meet modern standards. With new supply constrained post-pandemic in many CBD office markets, in 2024 we acquired 95 New Cavendish, an office redevelopment opportunity in London. We are refurbishing this asset to modern standards on behalf of a separate account mandate for a German pension fund.

The logistics sector is also attracting significant investor interest. AEW has maintained active involvement in this market over the past year on behalf of our funds and separate mandates, and we expect this trend to continue into 2026.

What are your key strategic priorities for the year ahead?

Our focus for 2026 is on growth and delivering attractive returns for our investors. We will leverage our global platform and operational excellence to achieve these objectives.

Christina Ofschonka, AEW