Investor sentiment towards European real estate has faltered for the second consecutive quarter, according to the European Association for Investors in Non-Listed Real Estate Vehicles (INREV).

According to INREV’s Consensus Indicator, which measures participants’ confidence in the market, sentiment fell from a score of 56.7 to 52.2 in June.

This was despite a positive total return of 1.04% and capital growth of 0.56% for European real estate in Q1.

INREV said the research points to a disconnect between performance and sentiment, with market participants still proceeding with caution.

This month is the first time since March 2024 that INREV’s new development, investment liquidity and economic sub-indicators all fell below 50, highlighting growing uncertainty about market recovery.

The office sector posted positive returns of 1.11% in Q1 2025, after several quarters of negative asset-level returns. Residential and retail had the highest return, at 2.03% and 1.99%, respectively, followed closely by student housing, industrial and logistics, with quarterly returns above 1.80%.

However, the peak in sentiment for retail appears to have passed, with INREV’s indicator dropping 16% quarter-on-quarter to 6%, while net sentiment towards offices slid into the negative at -10%.

Iryna Pylypchuk, head of research and market information at INREV, said: “While European real estate has maintained positive performance, market participants remain prudent, behaving on a side of caution. The latest INREV Consensus Indicator highlights a lack of consensus as market bifurcation intensifies.

“Investors should keep in mind that Europe is leading the global recovery cycle. Current market inertia presents a timely window for new opportunities. Even though recovery may be more protracted, the turnaround might happen faster than current sentiment predicts.”