Private assets

The resurgence of real estate

April 14, 2025 - 3 min read

Rob Wilkinson, CEO
AEW Europe

What is your outlook for real estate in Europe in 2025?

Real estate's been through a huge challenge in the last three years.

This shift in the interest rate environment has led to a lot of price reduction in our market, lower transaction volumes, lower capital rates. It's been very difficult in the real estate markets for the last three years.

But what's really encouraging as we've come into 2025 is that the interest rate environment is now stabilising and investors are now becoming much more open and active to investing back in real estate.

We saw investment volumes rise a little bit last year, but we're really expecting that to take off in 2025 with up to at least 25, 30% more than last year. The challenge is, I think, probably the same for many in the asset management industry.

The geopolitical environment is clearly quite volatile and that may have implications for the capital markets as well, which is what affects us.

So, if there were to be another spike in inflation or interest rates, that could clearly create some issues for us. But at the moment we're not anticipating that. We're expecting interest rates to somewhat decline in 2025.

What shifts do you observe in the way investors approach real estate?

It's quite simple in a way. Three years ago, investors were mostly saying:
"I can't invest in real estate".

Two years ago it was: "I won't invest in real estate".

Now we're seeing that change.

They're now saying: "I will invest in real estate".

They're open to doing so.

We've moved from investors, as I said, not willing to, to saying: "actually I do want to and this is how much I'd look to invest. These are the strategies that I'm interested in". It's a much more proactive and structured approach now, which is positive.

What are the next frontiers for managers in real estate?

There's been a huge change anyway in the last 10 years as investors have gone from big exposure in the office market and some retail to a shift where it's a much more balanced approach across the major food groups of real estate, as we call it, which are office, retail, logistics and residential. They have much more balanced portfolios.

The new frontiers that come from there are the alternative sectors of real estate which are emerging.

And in our minds that's really two areas that are a key focus for us.

Healthcare is clearly an area of significant growth and then everything linked to technology, data centers and AI, is another area that's going to be a big growth and a new frontier for our industry.

How have sustainability-linked requirements evolved in real estate?

It's obviously an area of quite a lot of debate currently in the US in particular where there's been a little bit of a shift of emphasis away somewhat from sustainability and ESG.

In Europe it's still as strong as it was.

And when I look at it and talk to investors about this, actually what's really shifted in Europe is that whereas investors had a focus on it now for several years, it's the occupier market that's really interesting.

Whenever someone is looking at actually renting a new building, the environmental, energy consumption, climate change impact of the building is hugely important. It's actually moved a little bit from the investor towards the occupier focus, which actually will then come back round again because the occupiers that provide, pay the rent that help provide the returns to those investors.

It's kind of creating a virtuous circle.

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