Income growth drives European real estate in 2026

Speaking to Real Asset Media at Mipim 2026, David Inskip, EMEA head of research at CBRE Investment Management, shares his insights on the outlook for European real estate, including market sentiment, sector dynamics and capital flows.

Inskip explains that the market has firmly transitioned into a higher interest rate environment, with investors increasingly focused on income growth and net operating income as the primary drivers of returns.

“At CBRE IM, through this coming cycle, we’re really focused on income growth. So we’ve clearly shifted into a higher interest rate environment. We see the world staying in that environment, probably with more volatility there as well.”

He highlights a more flexible, sector-agnostic investment approach, targeting markets and assets where strong occupier demand meets constrained supply.

“So we’re really focused on growing NOI across markets, that actually leads us to be quite sector agnostic. We’re really focused on those pockets, be they markets or specific assets, where the strong demand is hitting a lack of supply, and we think that will be the key driver of returns.”

In the office sector, Inskip notes that the sharp divide between prime and secondary assets is beginning to ease slightly, particularly in leading European cities.

“For offices, what we’re beginning to see is that the stark bifurcation between the best assets and everything else is maybe just moderating a little.”

He points to London as a key example, where demand for prime space is starting to extend into the next tier of buildings and locations.

“So in places like London, we do begin to see that demand for the very best space spilling over into the next tier of buildings and locations. So that’s positive and certainly one for investors to watch.”

Retail performance remains uneven across Europe, with stronger fundamentals in Southern Europe and more challenging conditions in Northern markets.

“In retail, it’s a very mixed bag. So you have markets like Spain, and to a slightly lesser extent, Italy, even the [CEE] markets, where actually the consumer picture is strong, sales growth is good. There are plenty of schemes across the types, be it high street, retail, park, shop in centre, where the prospects are good.”

However, he adds: “When you move to Northern Europe, the picture isn’t quite so positive, and you need to be a bit more selective. There we probably see retail warehousing leading over shopping centres.”

On capital flows, Inskip observes a shift towards more domestically focused investment, although international capital continues to play a role.

“With all of the uncertainty, I think capital has become a bit more domestic and locally focused, so the European capital is really important. But we still see the flows from around the world.”

He adds that US capital is currently more constrained, while investors from Asia-Pacific and Canada remain active, often targeting higher-return strategies.

“I think US capital is generally staying at home at the moment, but we see more flows from Asia-Pacific, from places like Australia. We also see flows coming from Canada. They’re typically looking for a little bit of extra return, so more focused on the core plus strategies than the real core.”