The outlook for European real estate is brighter than ever as leading sector results for the first half of 2025 reveal stronger performance than analysts anticipated. Boosted by higher occupancy rates and lower financing costs, industry confidence is on the rise, with global giants like Bank of America spotlighting standout opportunities—including a key Spanish player: Colonial.
European Real Estate Exceeds Market Expectations
According to Bank of America’s latest report on European Real Estate, more than half of their covered companies have posted first-half results for 2025, outpacing market forecasts. On average, earnings per share (EPS) exceeded expectations by 3%. Seven out of 13 companies covered have already raised their EPS outlook for 2025, signaling robust sector momentum.
Key highlights from 1H 2025 performance:
- EPS Growth: An average 4% year-over-year increase in the first half of 2025.
- Comparable Rent Growth: 70% of companies saw a continued, though slightly slower, rent growth of 4%, compared to 4.4% in 2024.
- Forecast Adjustments: EPS projections for the full year were raised by 3%, reflecting ongoing optimism and strong fundamentals.
Colonial: Spain’s Real Estate Standout
In this positive climate, Bank of America has set its sights squarely on Colonial, a leading Spanish REIT (Real Estate Investment Trust). The bank has issued a ‘buy’ recommendation for Colonial, with a target price of €6.7 per share. This comes as Colonial posted strong results, with recurring net profit surging by 17% to €107 million in the first half of the year.
Why Is Colonial in Focus?
- EPS & DPS Upgrades: Bank of America has increased its EPS estimate for Colonial by 3% and its dividend per share (DPS) by 1% for 2025–2027, maintaining a positive outlook for investors seeking both growth and income.
- Strategic Asset Conversion & Corporate Merger: The conversion of two assets by Colonial, along with the upcoming merger between Société Foncière Lyonnaise (SFL) and Colonial, is expected to deliver significant benefits and synergies.
- Earnings Quality: Positive tax effects and an increase in other income offset a minor loss in rental income, contributing to Colonial’s robust profitability.
While the company’s NTA (Net Tangible Assets) estimate was trimmed by 1%, Bank of America notes that Colonial’s earnings remain resilient and reflective of exceptional operational execution.
What’s Driving the Sector’s Growth?
The overall European real estate sector is thriving due to higher occupancy rates and more favorable financing conditions. Lower costs of capital have allowed companies to leverage investment opportunities, while steady rental income continues to underpin growth—even as rent escalations slow slightly.
Cautious optimism prevails, with most real estate firms posting results in line with or above earnings expectations, though NTA growth remains modest amid portfolio revaluations.
A Promising Horizon for Investors
European real estate investors have fresh reasons for confidence, and big institutions like Bank of America are doubling down on their positive outlook. With Colonial positioned at the forefront of the Spanish market, boosted by solid earnings growth and strategic corporate developments, the sector is set for another year of strong performance.
In summary:
- European real estate outpaces expectations with stronger EPS and rent growth.
- Bank of America names Colonial as a top Spanish pick, raising forecasts and recommending a ‘buy’.
- Investors can expect robust, stable returns from Europe’s property sector, with special attention on Spain’s Colonial.
Stay tuned for more real estate market insights—2025 is shaping up as a banner year for European property investors.
Sources: Bank of America Real Estate Report, Colonial H1 2025 Earnings
