Pan-European data shows UK offices outpace continental average amid subdued growth
Commercial real estate values in the UK saw marginal growth in the second quarter of 2025, according to new analysis from Altus Group, which tracks valuation trends across major European markets.
The firm’s latest Pan-European dataset, covering €29 billion (£25 billion) in assets across 17 countries, found that UK office values rose by 0.8% in Q2, outperforming the European average of 0.3%. This increase was attributed to favourable yields and continued rental growth, which supported investor confidence.
Year-on-year, UK office values were flat, while Germany and the Netherlands recorded declines of 0.6% and 1.5% respectively. France saw a 6.8% annual increase in office values.
Despite the recent uptick, the office sector remains under pressure. Over the past three years, UK office values have fallen by 7%, reflecting the sector’s ongoing challenges. Across Europe, office values declined by 7.7% year over year, placing the sector at the bottom of the rankings.
Separate data from the Royal Institution of Chartered Surveyors (RICS) also showed a UK commercial property market that remained largely flat in Q2. London’s office sector showed more resilience than other UK regions, but overall occupier demand and investment enquiries stayed steady, with landlords offering incentives amid rising vacancies.
“The results remain consistent with a largely stagnant market at the national level,” said Tarrant Parsons, head of market research and analysis at RICS. “Both occupier demand and investment enquiries are still broadly flat, while landlords continue to offer significant incentives to attract tenants amidst rising vacant space.”
For mortgage brokers, these conditions highlight a market in transition. Opportunities are likely to be found in prime assets and alternative sectors, while most segments remain subdued. Brokers may need to tailor solutions as the gap widens between prime and secondary markets.
Meanwhile, Altus Group’s quarterly review also showed that, for the fourth consecutive quarter, commercial property values across its Pan-European dataset increased, rising 0.6% from the previous quarter and 2.8% compared to Q2 2024. However, the pace of growth slowed as cashflow gains moderated to 0.5%, the lowest level in a year. The report noted that improving investor sentiment, amid lower interest rates, continued to support yields.
“Four consecutive quarters of valuation improvements is a clear sign that market fundamentals are stabilising across Europe,” said Phil Tily, senior vice president at Altus Group. “Despite mixed macroeconomic conditions across the region, the CRE valuation trends point to a real estate market that is regaining its footing and gearing up for the next phase of the cycle.”
By sector, residential property led performance in Q2, with values up 0.9% over the previous quarter, supported by robust cashflow fundamentals. Industrial assets followed, rising 0.8%, although cashflow appreciation slowed. Office and retail sectors both posted modest gains of 0.3%. The retail sector continued to face weak rental growth and higher operating costs, which weighed on cashflow. Outside the main sectors, student accommodation values increased by 1.9% quarter-on-quarter.
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