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Industrial And Logistics Is 2025's Top Investment Pick, But Office Market Remains Challenging

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Colliers has picked out industrial and logistics as this year's investment star.

Despite ongoing geopolitical and economic challenges, real estate market sentiment is showing signs of recovery, with investors prioritising resilience and adaptability, meaning the European market is poised for renewed activity in 2025, according to ColliersEMEA Real Estate Outlook 2025.

The report says a rebalancing of investment activity across asset classes will create opportunities in retail, hospitality, industrial and logistics, and alternative living sectors, although the office sector remains in a “challenging repositioning phase.”

Industrial and logistics is Colliers’ “prime pick for 2025.” It said the logistics sector remains the top investor choice thanks to strong liquidity, rental growth and attractive risk-adjusted yields.

“Equally, the capacity for industrial & logistics assets to generate and commercialise renewable energy on-site, plus the increasing sophistication and value placed on technological infrastructure puts the sector well in the frame for infrastructure funds,” it said.

Colliers predicted a slow recovery and selective investment for offices, with the market remaining under pressure and with core strategies being deprioritised because of bond rate shifts. However, activity has increasingly focused on refurbish-to-core and change-of-use strategies. It pointed to Asia Pacific investors showing interest in high-grade space, driven by rental growth prospects in key European markets, although it said U.S. investors were likely to be more cautious.

“For the first time in years, retail shopping centre rents are stabilising,” the report says, adding that investment activity is picking up, benefiting from price corrections, recalibrated formats and a lack of new supply. 

Strong fundamentals have continued to drive growth in the hotel sector, which Colliers said was experiencing robust growth, driven by a sustained increase in occupancy and revenue per available room, though average daily rate growth had moderated. The sector remains attractive because of M&A and JV opportunities, particularly among midsized owner-operator hotels.

The adviser said investors are increasingly drawn to senior housing and student accommodation in the living sector, both of which it said offer resilience against rising construction costs and regulatory complexities. It predicted that investors will be more selective in picking multifamily/build-to-rent assets given the “nuanced rental outlook.” 

“Investors are navigating uncertainty by diversifying their portfolios into sectors with resilient demand and strong fundamentals,” Colliers Head of Global and EMEA Capital Markets Luke Dawson said of the findings. “Logistics and hotels, in particular, remain standout performers, underpinned by strong growth fundamentals from a demand perspective.”