Europe's property investment market has surpassed €2trn (£1.73trn) in value for the first time, according to research from the European Association for Investors in Non-Listed Real Estate Vehicles (INREV) and the European Public Real Estate Association (EPRA).

The report, which examines listed and non-listed real estate markets, highlights significant shifts in capital allocation, leverage and investor preferences across Europe.

Growth in the non-listed market has been driven by institutional funds, joint ventures and separate accounts. Pension funds, insurers and sovereign wealth investors are driving demand for income and diversification.

Listed markets have expanded through the adoption of REIT and real estate operating company (REOC) structures, alongside improved transparency and market consolidation.

Industrial and logistics has seen the sharpest deleveraging of any non-listed sector since 2012, with average gearing falling from 47.6% to 25.3%. In listed markets, it now has the lowest loan-to-value (LTV) ratio of any major sector, at 35%, while allocations to the sector have increased significantly across both listed and non-listed portfolios.

The UK stands out as Europe’s least leveraged listed real estate market, with an average LTV of 30% compared with 44% in 2010. According to the report, this reflects general deleveraging across UK REITs since the 2008 global financial crisis.

Property Week’s analysis (using EPRA data where available) shows that the median LTV across 17 major UK listed property companies was 35.1%, up from 32.6% the previous year but comfortably below the 40% level seen by many analysts as a threshold for concern.

Meanwhile, the UK’s presence in the non-listed market has declined since 2012, following the closure and wind-down of several open-ended property funds. Assets held in these vehicles fell from around £7.8bn in October 2021 to £2.8bn by October 2024, reducing opportunities for investors seeking UK logistics exposure through non-listed funds.

In non-listed markets, gearing varies widely between countries, ranging from an average of just 5.8% in the UK to 32.8% in Germany. The report suggests these differences are driven less by property type than by national funding models and investor preferences, with UK pension and insurance investors favouring conservatively geared, open-ended core funds.

According to the report, the striking trend is how far Europe’s listed and non-listed property markets have converged. Both have reached institutional scale; deleveraged structurally; rotated out of retail and offices and into residential, industrial and logistics and alternatives; and moved their centre of gravity from the UK to Germany.

What still sets listed and non-listed markets apart is not the asset classes invested in, but the route used to invest, according to the report.