Southern Europe gains ground as investors reassess Europe’s commercial property markets

Spain and Italy are strengthening their positions on the investment map, while shopping centres and out-of-town retail properties are attracting growing investor interest.

Investment in European commercial real estate exceeded €187 billion over the past 12 months, representing an annual increase of 8%, according to BNP Paribas Real Estate. However, the overall growth in investment activity has not been evenly distributed across all property sectors, as investor interest continues to shift between individual asset classes and geographical markets.

More specifically, investment in office properties increased by 14%, while logistics assets recorded an 8% rise. Retail properties, by contrast, experienced a 5% decline, while investment in hospitality assets fell by 7%.

Despite this decline, retail remains the third-largest asset class in the European commercial real estate market, attracting €37 billion in investment over the past 12 months, equivalent to 20% of total transaction volumes. This represents a decrease from the 23% share recorded by the sector in September 2025.

Offices account for the largest share, at 28%, followed by logistics at 24%, while hospitality properties represent 11%.

Southern Europe Gains Ground on the Investment Map

One of the key trends highlighted in BNP Paribas Real Estate’s analysis is the shift in investment activity away from traditionally dominant markets such as the United Kingdom, Germany and France towards other European countries, with Southern Europe becoming increasingly attractive to investors.

In the United Kingdom, investment volumes in retail properties declined by 33% year-on-year, while Germany and France recorded broadly stable levels. By contrast, Spain posted a 15% increase, while Italy continued its upward trajectory for the third consecutive year, with investment exceeding €4 billion and reaching a record high.

Significant increases were also recorded in Norway, where investment rose by 62%, and the Netherlands, with growth of 52%, although both markets started from a considerably lower base.

The geographical redistribution of investment is partly linked to the different types of commercial real estate attracting capital in each market. In Northern Europe, investor interest is more heavily concentrated on out-of-town retail properties (retail warehousing), whereas shopping centres dominate in Southern Europe. At the European level, however, investment volumes across the different retail sub-sectors are becoming increasingly balanced.

Milan Acquisition Influences Overall Market Performance

Investment in high street retail properties increased by 4% over the past 12 months, reaching €8 billion, compared with €7.7 billion a year earlier.

However, this performance should be interpreted with caution, as it was largely influenced by one particularly significant transaction: the acquisition of the property at Via Monte Napoleone 8 in Milan by the Kering Group for €1.2 billion, which was completed in the second quarter of 2026.

Excluding this transaction, activity across the remainder of the market was considerably more mixed, with no similarly strong momentum evident.

Major Retail Transactions and Strong Interest from International Investors

Investment in shopping centres declined by 4% over the past 12 months, totalling €7.8 billion, compared with €8.2 billion during the corresponding period of the previous year.

Behind the overall figures, however, significant differences emerged between individual markets. France and the United Kingdom recorded the steepest declines, at 53% and 23%, respectively. Conversely, Germany posted a 51% increase, while investment volumes in Spain rose by 19%.

Several major transactions were completed over the past 12 months, including:

• The acquisition of the Palladium shopping centre in Prague for €700 million.
• The acquisition of Orio Center in Bergamo, Italy, for €470 million.
• The acquisition of the Islazul shopping centre in Madrid for €340 million.

At the same time, the market was supported by a steady flow of mid-sized transactions, valued between €100 million and €200 million, primarily in Germany and Spain.

According to BNP Paribas Real Estate, shopping centres continue to attract strong interest from a broad range of investors. This comes at a time when the availability of high-quality assets for sale remains limited, while the resilience of consumer spending is supporting the sector’s outlook.

Interested investors include specialist investment firms, listed real estate companies from Europe and South Africa, private equity funds from the United States and the United Kingdom, as well as sovereign wealth funds.

Retail Warehousing: Investment Reaches €8.8 Billion

Out-of-town retail properties (retail warehousing) attracted €8.8 billion in investment across Europe’s major markets over the past 12 months.

Despite a 20% year-on-year decline, this asset class outperformed the other two main retail sub-sectors in terms of investment volume. The decrease was primarily attributable to reduced activity in the United Kingdom, where investment fell by 31%, and Germany, where the decline reached 44%.

By contrast, Spain and France recorded particularly strong performances, with investment volumes increasing by 63% and 54%, respectively.

Retail warehouses continue to attract investor interest, particularly when they benefit from a strong presence of food retailers. However, the limited supply of available properties for sale is constraining further growth in transaction activity.

Investors Become More Selective Amid Yield and Interest Rate Pressures

The changing investment environment was outlined by Patrick Delcol, Head of European Coverage, Retail, Logistics & Hospitality at BNP Paribas Real Estate, who noted that the market is undergoing a period of yield decompression, with adjustment taking place at different rates across individual countries.

According to Delcol, mature markets are proving more vulnerable to macroeconomic developments. Against a backdrop of higher interest rates and delays in the adjustment of property values, investors are adopting more selective strategies, focusing on high-quality assets and opportunities supported by stronger fundamentals.

At the same time, retail properties, particularly shopping centres and retail warehouses, currently offer some of the most attractive risk premiums over government bonds among the various real estate asset classes.

This factor is expected to sustain investor interest in both sectors and support their resilience over the coming quarters, despite the continued pressure that higher interest rates are exerting on valuations.

Spain, Italy and Poland in the Spotlight

Geographically, investors are primarily targeting markets with strong macroeconomic fundamentals and resilient consumer spending. Poland stands out on account of its economic momentum and infrastructure development, while Southern Europe continues to maintain its appeal.

Spain is benefiting from favourable economic growth prospects, while in Italy, yield adjustments have created more attractive pricing levels, which are expected to draw additional capital, particularly from specialist investors.

Overall, the figures highlight a European commercial real estate market that continues to attract significant investment capital, albeit according to considerably more selective criteria. Asset quality, the stability of rental income, consumer behaviour and investment yields are now among the key factors shaping the direction of investment.