Investment in UK commercial real estate dropped 7% to €12.7bn (£11bn) in the first quarter of 2026 on a yearly basis, according to MSCI’s latest quarterly Europe Capital Trends report.
The UK, which was still Europe’s most active real estate investment market, saw its capital city remain the top destination in Europe, with transaction volumes up 3% on the first quarter of 2025.
Ireland’s commercial real estate investment market saw a significant 37% drop in completed deals compared with a year earlier, down to €573m (£496m). Dublin dropped to 17th place in a ranking of Europe’s top investment destinations following a 26% drop in volumes, which accounted for the bulk of investment in the Irish market.
Across all of Europe, a total of €47.3bn (£41bn) of transactions were completed between January and March, down 10% from the same quarter a year earlier. This result is also significantly lower than the €90bn (£78bn) of completed deals recorded in the preceding quarter.
According to MSCI, Q1 was the weakest quarter for acquisitions by global institutions since 2010, while major institutional investors in Europe were net sellers of real estate.
The only sector to escape the slowdown was senior housing, which recorded the strongest 12 months of investment since MSCI records began in 2007. Meanwhile, offices remain the largest sector by investment volume. After a difficult few years for the sector, MSCI said it appears some markets have turned the corner.
Aggregate volumes in the office sector were up 24% in the last 12 months compared with the prior period and some momentum is also returning to the CBD markets in some of Europe’s biggest cities.
Office volumes are up year on year in central London, Paris and Berlin and are also above their long-term average in Madrid and Barcelona. A relative dearth of development is pushing up rents for the best-quality assets in these cities, according to MSCI.
Tom Leahy, head of EMEA real assets research at MSCI, said: “Europe’s real estate market has become highly sensitive to changes in interest rates. The Iran conflict has altered expectations for lower interest rates in the UK and put higher borrowing costs on the agenda in the eurozone. It’s a notable shift from the fourth quarter last year, when there appeared to be strong momentum for a sustained recovery in real estate investment volumes.
“The key for investors will be how they navigate this new cycle, assessing where performance could depend on asset selection and operational performance rather than sector allocation.”