The risk of a resurgence of inflation presents a mixed outlook for the European real estate sector
7 APR, 2026
Philipp Wass and Thomas Faeh, Directors of Corporate Ratings at Scope Ratings
Energy-related inflation and other economic consequences of the war will widen the credit gap in the European real estate sector. The impact will depend on tenant demand and their ability to pay.
Overall, inflation directly increases the cost of living in the residential sector, reducing household disposable income and eroding affordability.
Since many households were already facing stricter mortgage conditions before the latest Middle East conflict, any inflation-driven pressure on interest rates could further dampen homebuyer enthusiasm. In the rental market, affordability constraints may increase loss risks for landlords and weaken demand in markets that are not experiencing a structural shortage of supply. That said, the residential segment generally remains supported by a chronic supply shortage. CBRE expects structural scarcity to continue driving rent growth.
Commercial real estate operators face a different mix of pressures. On the revenue side, CPI-linked lease contracts that provide for automatic rent increases in many jurisdictions give landlords nominal benefits in sectors such as logistics, offices, and retail. However, the simultaneous rise in operating expenses, driven by higher energy costs, for example, creates new affordability challenges for tenants, especially those in high-energy-consuming properties.
If the conflict persists and the economic climate deteriorates, the most vulnerable tenants may choose to downsize, renegotiate contracts, or vacate properties. This dynamic is particularly relevant for secondary office spaces, which already face a risk of structural obsolescence due to environmental requirements and changing preferences in workplace environments.
