RICS: Sentiment improves slightly despite turbulent geopolitical environment as headwinds ease / Germany: Credit conditions deteriorate sharply, majority sees the market in a downturn or at the bottom of the cycle

The results of the RICS Global Commercial Property Monitor (GCPM)* for the second quarter of 2026 paint a broadly stable and slightly improved picture at the aggregated level. The central Commercial Property Sentiment Index (CPSI)** rose slightly to -1 (after -3 in the first quarter of 2026). This brings it further closer to neutral territory, continuing the upward trend observed since the second half of 2024, despite the setback caused by the escalation of tensions in the Middle East at the beginning of the year.

Below the aggregated analysis, the results at the country level show a clear shift. Some previously stronger markets are weakening, while several markets that struggled with difficult conditions are seeing significant improvements. Credit conditions remain far from uniform, even though some markets have seen a partial reversal of the tightening reported in the first quarter.

The CPSI for the Americas region continues to be in the lead. It rose to +12 in the second quarter (after +10 in the first quarter), continuing the positive momentum of the past two years. In the United States, which largely determines the value for America, the CPSI rose to +13 (after +10), while Canada moved slightly into positive territory at +3 (after -1). Feedback from U.S. participants emphasizes the strength of the industrial segment and further improvement in the office sector. The recovery in lending and abundant liquidity are cited as the main pillars.

Europe also recorded a slightly more favourable result. Here, the CPSI moved -6 (after -8) back towards zero. France and Italy, which had recorded the weakest European stocks in the first quarter, both improved. The French CPSI rose to -32 (after -39), while the Italian reading returned to positive territory at +4 (after -8). Ireland improved to +14 (after +6), Great Britain to -8 (after -12). Germany, on the other hand, fell slightly to -23 (after -20), reflecting the continued restraint in the country's largest metropolises. Poland and Spain continue to be among the strongest European markets with +27 and +26 respectively.

In contrast, the Middle East Africa (MEA) region recorded the largest quarter-on-quarter decline, falling to -1 (after +3 in the first quarter and +11 in the fourth quarter of 2025), weighed down by the ongoing disruptions caused by the conflicts in the region. The United Arab Emirates recorded the largest decline by a single country in the world, falling to -32 (after -12 in the first quarter and +37 at the end of 2025). Saudi Arabia's CPSI, on the other hand, was not affected to the same extent, even though the current reading of +15 remains below the highs of 2024 and early 2025. Overall, however, the market continues to show solid fundamentals in terms of underlying user and investment metrics. Meanwhile, the mood in South Africa's commercial real estate market remains positive; the CPSI rose slightly to +13 (after +11).

The CPSI for the APAC region remained broadly unchanged at -12 (after -11) and thus continues to weigh slightly on the global total. China (-32 from -38) and Hong Kong (-12 from -14) each recorded slight improvements, although sentiment remains markedly negative. Momentum in Japan weakened; the central index fell to +27 (after +40), but remains strong in a global comparison. India and Sri Lanka continue to perform solidly and show clearly positive values for all major demand indicators.

The relative stability is also reflected in the key figures of the user markets. The global Occupier Sentiment Index (OSI)*** rose to zero in the second quarter (after -2 in the first quarter). Occupier demand across all real estate segments held up well; the net balance was +10% (after +12%), indicating continued positive momentum in letting activities.

The Americas region continues to have the strongest fundamentals in the user markets. The OSI rose to +15 (after +11), while user demand increased to a net balance of +36% (after +32%). This is in line with industry commentary, which points to a stronger office presence as well as continued momentum in the leasing of industrial and logistics space. User demand in MEA also remained clearly positive at +11%, although this is a slowdown from +24% in the fourth quarter. The net balance of European user demand improved slightly to -2% (after -3%), while APAC turned slightly negative at -6% (after +4%), due to weaker figures in Australia, Hong Kong and mainland China.

While the sharp deterioration in credit conditions reported at the beginning of the year moderated in some markets in some markets, financing conditions in other markets continued to be a significant headwind. In addition, the global environment remains uncertain. Recent energy price hikes and ongoing geopolitical tensions have once again heightened concerns about inflation, interest rate expectations and volatility in bond markets.

The strongest improvements in the second quarter were recorded in Hungary, where the net balance rose to +72% (after +11%), Singapore (+33% after -14%), Poland (+50% after +15%) and China (+37% after +7%). In the UK, too, credit conditions became less restrictive. Here, the net balance improved to -23% (after -44%).

In contrast, financing conditions deteriorated significantly in Saudi Arabia (+8% after +71%), Belgium (-67% after -25%) and Germany (-70% after -42%). This underlines that credit conditions are increasingly market-specific. While certain European markets are facing the effects of volatile energy prices, Middle Eastern economies continue to be impacted by regional conflicts, particularly disruptions to key energy infrastructure and oil transport routes. The MEA value for credit terms decreased to +7% (after +17% in the first quarter and +34% at the end of 2025), reflecting the loss of momentum in the region's central CPSI.

At the global level, the net balance of net present value expectations for the next 12 months increased to +13% (after +4% in the first quarter). Measured by concrete point estimates, the global forecast for all real estate segments for the next 12 months is now +0.2% (compared to -0.2% previously). Growth of +2.2% is expected for first-class office properties (after around +1.5% previously), +1.6% for first-class industrial properties and +1.6% (after +0.9%) for first-class retail properties. Secondary segments continue to show a weaker picture, but the pace of the expected decline has slowed.

On a net balance basis, India (+68%), Sri Lanka (+82%) and Switzerland (+56%) lead the ranking of NPV projections at the country level, while China (-41%), Austria (-39%) and Germany (-31%) are at the other end of the scale. The most noticeable changes include Italy (from -7% to +15%) and Malaysia (from +13% to +40%), while New Zealand (from +21% to -9%) and Bulgaria (from +41% to +17%) saw the largest downward revisions.

Expectations for rents over the next 12 months follow a similar pattern. The global net balance across all real estate segments rose to +14% (after +9%). Over the next 12 months, rental growth of 2.1% is expected for prime office properties and 2.2% and 1.8% for prime industrial and retail properties, respectively. Data centers remain outstanding in the alternative real estate segments, with rental growth of 4.3% and net present value growth of 4.9% (up from previously 4.1% and 4.0%, respectively). Care facilities, hotels, student dormitories and apartment buildings continue to show positive growth forecasts, while expectations for life sciences real estate are somewhat more subdued in comparison.

Respondents' assessment of the current phase of the real estate cycle shifted slightly in a more positive direction in the second quarter. The proportion of those who considered the current conditions to be an early recovery rose to 28% (up from 24%), surpassing the "medium downturn" (19%) and "trough" (18%) categories, making it the largest single group.

Together with the slight firming of the key sentiment indices, this suggests that respondents are cautiously optimistic that the bottom of the current cycle may have been passed by now, even if the pace of a potential recovery continues to vary from market to market.

Assessments of the current valuation level remained largely stable. 49% of respondents described the market as fairly valued (up from 47% in the first quarter), 30% considered it expensive (almost unchanged) and 16% rated conditions as favourable. The proportion of those who described the market as very expensive fell slightly to 5% (after 7%). This is in line with a general easing of price concerns following the sharper correction at the beginning of 2026.

The European CPSI made up some of the ground lost in the first quarter, rising slightly from -8 to -6. This means that the index is largely back at the level of the end of last year, although it is still in slightly negative territory. The slightly less pessimistic sentiment was evident on both the user and investor side of the market.

Both the Occupier Sentiment Index (OSI)*** and the Investment Sentiment Index (ISI)**** have diverged at different points in recent years. However, the latest figures show that they have converged again in the past two quarters. Neither of the two indices has yet returned to positive territory, but the development last year was characterized by a gradual stabilization rather than a renewed decline.

The country-level analysis continues to show significant differences in sentiment across Europe, with this pattern intensifying in the current quarter. Poland now has the most positive scores of all European markets surveyed. The CPSI rose to +27 there, closely followed by Spain with +26. Portugal and Ireland also remain clearly in positive territory. In addition, Hungary, Greece, Switzerland, Cyprus and Italy have also moved into expansionary territory this quarter.

At the other end of the spectrum, the CPSI score in France remains the weakest in the entire region at -32, although this represents a slight weakening of pessimism compared to the -39 recorded in the first quarter. Austria fell significantly from -9 to -24, while Germany slipped even deeper into negative territory with -23. In the UK, the central sentiment index improved from -12 to -8 and was thus less pessimistic.

Below the more stable overall indicator, the credit environment continues to deteriorate. The net balance of credit terms fell further to -27%, compared to -24% in the first quarter and a clearly positive reading of +15% at the end of last year. This makes Europe the most negative in the world, while the global average is +3%.

The continued deterioration in Europe suggests that the tightening observed in the first quarter has not materially reversed at the regional level, with the impact of the energy price shock on inflation remaining a concern. In addition, the ECB's recent decision to raise interest rates underscores the ongoing inflation concerns in the region and is likely to further exacerbate the difficult credit environment in the near term.

Importantly, some of the issues that may have been raised in the previous survey are now actually happening. In the first quarter, it was noted that investment enquiries had remained stable despite the significant deterioration in credit conditions, and that the historical correlation between the two data sets indicated a slowdown in investor interest if credit conditions did not improve again. Credit conditions have not improved, and investment requests are now stagnating accordingly; the net balance fell to zero from +4% previously. The weakening is most evident in the office segment, where it fell from +1% to -6%, while industrial real estate continues to attract the strongest investor interest among traditional sectors at +8%.

However, the deterioration in credit conditions across Europe is by no means uniform. Austria recorded the strongest change of all the markets surveyed. Here, the net balance fell significantly from a previously neutral position, while in Germany it continued to decline and now stands at -70%. Bulgaria and Romania also recorded a significant tightening.

In contrast, several markets developed clearly in the opposite direction. Hungary and Poland improved significantly, while much of the negative outlook in the UK weakened compared to the first quarter. Nevertheless, the disruption caused by the ongoing conflict in the Middle East poses a significant risk and is likely to continue to cause volatility in interest rate expectations in the near term.

The indicators for the user market remained largely stable; the aggregate net demand balance changed only slightly at -2%. However, the composition by sector shifted somewhat. Demand for industrial real estate rose to +6% and retail sales were less negative than before (-9%) at -5%, while demand for office space deteriorated from -2% to a net balance of -8%.

Elsewhere in user data, availability continues to increase, albeit at a slightly slower pace (measured by net balance), and the level of incentives offered also rose again. Both correspond to a market in which landlords outside the prime segments continue to have only limited pricing power.

In terms of expectations, the forward-looking data is more encouraging than the indicators of current conditions suggest. Rental forecasts for the coming 12 months improved to a net balance of +13% (up from +5%), while expectations for 12-month capital values returned to positive territory and now stand at +3%, compared to -2% previously. Short-term forecasts also improved. The three-month NPV value recovered from -10% to -4%.

The contrast between deteriorating credit conditions and improving expectations suggests that respondents increasingly view the current funding environment as a short-term constraint rather than a longer-lasting problem.

Forecasts for capital values and rents in Europe over the next 12 months at the sector level follow the familiar pattern. Prime properties are expected to generate moderate positive returns, while secondary properties continue to lag. Data centers remain the sector with the strongest forecasted development. Here, capital values are expected to grow by 4.4%, followed by multifamily housing at 2.5%. Secondary office properties remain the weakest segment with an expected decline in value of -2.8%, closely followed by secondary retail properties.

At the country level, Poland and Spain are at the more positive end of the spectrum. There, the capital values of Prime office properties are expected to increase by 6.2% and 4.5% respectively. Switzerland also expects solid growth, especially in prime industrial real estate. In contrast, expectations for France and Germany remain the most subdued. In both markets, secondary office properties are forecast to decline by more than 6%. But even in these markets, data centers are expected to grow significantly, approaching 5% in both cases.

Finally, assessments of what stage of the cycle the market is currently in have changed somewhat this quarter. Across Europe, the proportion of respondents who see the market in an early upturn fell from 30% to 25%. However, this was largely offset by an increase in the proportion of those who expect a medium recovery phase. This increased from 10% to 15%.

At the country level, respondents in Poland, Hungary and Switzerland see market conditions most in line with an upswing, while feedback from France and Germany continues to focus on the mid-downturn and bottom. Spain is a notable exception. There, the largest single share of respondents classifies the market at its peak.

The current results for Germany show that sentiment on the real estate market as a whole remains depressed, both with regard to the user market and the investment market. According to the report, the overall CPSI index fell from -20 to -23 in the second quarter. In addition, a majority of respondents say that the market is currently either in a downturn (39%, down from 21%) or at the bottom of the market cycle (39%, down from 42%). Investor sentiment fell from -20 to -27; tenant sentiment remains at -20.

Investor demand across all asset classes remains in negative territory, falling sharply and reaching a net balance of -20% (Q1: -12%). The net balance for office properties is declining and now stands at -23% (Q1: -16%). In industrial real estate, the net balance of investor demand is also changing, falling to -6% (Q1: -2%), and retail real estate is showing the largest difference. Here, the net balance fell sharply from -19% to -33%. The net balance of tenant demand across all asset classes has recovered somewhat and reached a value of -18% in the second quarter (Q1: -24%). User demand for offices rose from -33% to -13%. Industrial real estate fell slightly from -6% to -8% and retail real estate rose almost imperceptibly from -33% to -31%.

There have been changes in the assessment of Germany as a real estate investment location; 46% (Q1: 30%) rate it as expensive and 11% as cheap (Q1: 12%). However, the number of those who consider prices to be reasonable has fallen significantly to 43% (Q1: 58%).

Net present value expectations for the next 12 months across all asset classes have also changed significantly, reaching a value of -31% (Q1: -17%). Office properties fell sharply from -24% to -39%. The outlook for industrial real estate capital values also fell from zero to -10%. Retail real estate has deteriorated sharply. They reached a value of -43% (Q1: -26%).

A different picture can be seen in the respondents' assessment of rents in the next 12 months. There, tenant expectations have remained at -14% and -13% respectively across all asset classes for the last three consecutive quarters. In the second quarter, an increase to -5% can be seen. Office properties rose from -9% to zero. Retail real estate also increased, reaching a value of -29% (Q1: -36%). Industrial real estate, however, is still in positive territory, rising from +6% to +12%.

Since the second quarter of 2020, German participants have consistently noticed a negative change in credit conditions. It was not until the first quarter of 2024 that the value turned positive (+4%) and remained well there in the course of 2024. The year 2025, on the other hand, was more volatile. Here, the values reached -11%, +25%, 0% and -6% over the four quarters. In the first quarter of this year, the net balance then fell significantly to -42%. Now it is falling sharply again, recording a value of -70%. This is also reflected in the figures for the start of project developments. Here, the net balance across all asset classes fell from -26% to -45% and thus remains in negative territory. The last time this value was in positive territory was in the fourth quarter of 2019.

Susanne Eickermann-Riepe FRICS, Senior Vice President (SVP) of RICS worldwide: "Key demand indicators remain largely unchanged in Europe and European sentiment is weak. Credit conditions are deteriorating again and investment reluctance is increasing. Differences in Europe become more pronounced in the overall index. While Poland, Spain and Portugal are clearly in positive territory, France, Germany and Austria remain at the bottom of the list. Indicators for the occupier market remained broadly stable, but availability in several asset classes increased and the level of incentives offered rose again. Expectations for rent forecasts and capital values have risen slightly, but moderate returns are only expected in prime markets, with secondary markets still lagging behind. Data centers remain the sector with the most predicted developments. The outlook for prime assets remains slightly positive, while hardly any relief is expected for secondary office properties and retail properties. Assessments of the market cycle remain strongly divided in Europe, with only a few countries seeing an incipient upswing."

Jens Böhnlein MRICS, CEO of RICS Germany: "The user is giving a sign of hope, the capital market remains sceptical. The German real estate market is showing the first signs of life, but not yet a trend reversal. He remains in a difficult transition phase. The beginnings of a bottoming out that were evident in the past quarter have not yet condensed into a sustainable trend reversal. In particular, the further deterioration in credit conditions and declining capital value expectations are slowing down the recovery and weighing on the willingness to invest. At the same time, there are initial positive signals on the user side: demand for office space has improved and rental expectations are also developing more favourably again. This shows an increasingly differentiated picture of the market. Stable financing conditions, realistic price expectations and a revival of investment activity remain key prerequisites for a sustainable recovery."

* The survey took place from June 10 to July 13, 2026, and 1,368 companies took part.

** The Commercial Property Sentiment Index (CPSI) is an unweighted average of OSI and ISI (see below). The regional indicators are weighted against the estimates of the commercial real estate portfolio provided by LaSalle Investment Management and adjusted annually.

The RICS Occupier Sentiment Index (OSI) is formed from the unweighted average of the metrics for three series related to the user market that are measured on balance: user demand, level of incentives and tenant expectations.

The RICS Investment Sentiment Index (ISI) is calculated as an unweighted average of the readings for three series related to the investment market that are measured on balance: investment inquiries, net present value expectations, and the supply of properties for sale.