European listed real estate shares have tumbled since late February, bringing valuation measures back to depths similar to the 2009 financial crisis, according to researchers at Goldman Sachs. The brokerage said the sector has suffered a rapid selloff, driven by a rise in sovereign bond yields and a widening of credit spreads.
Goldman figures show the sector fell about 14% from Feb. 27 and now trades at roughly a 40% discount to 12-month forward net tangible assets - a gap materially wider than the sector's long-term average discount of 19% since 2000. At the same time, earnings yields have expanded to 8.1%, compared with a historical average of 5.9%.
The recent market move follows a sharp move higher in UK and European 10-year government bond yields, which rose by 40-70 basis points, coupled with an 18 basis point widening in credit spreads after the outbreak of conflict in the Middle East, Goldman said. Those moves have raised financing costs and weighed on asset valuations across the property sector.
Goldman's macro team has adjusted its economic forecasts in response to the evolving picture. The firm reduced its 2026 growth estimate for the euro area to 0.7% and for the UK to 0.6%, while modestly raising its inflation projections. The bank expects the European Central Bank to raise interest rates twice more by June, whereas the Bank of England is seen holding rates steady.
Despite the less favorable macro backdrop, Goldman argues current market pricing presents attractive entry points for investors. On a forward earnings basis the sector trades at 13.5 times earnings - among the lowest valuations across European industries on a historical basis. After lowering price targets by 6% to account for higher funding costs, the brokerage estimates an average upside of about 20% to current share prices.
In its stock recommendations, Goldman upgraded Klepierre and Landsec to "buy," citing strong occupancy trends, resilient rental growth and balance-sheet improvements. By contrast, it downgraded Big Yellow to "sell" on signs of weakening occupancy and slowing rent growth, and it reinstated Lumo Homes with a "neutral" rating.
Goldman also highlighted the sector's defensive features versus short-term rate moves. Across the European real estate universe, an average of 87% of debt is hedged, meaning that a 25 basis point rise in interest rates would reduce earnings per share by around 0.6% on average. At the same time, the brokerage warned that asset valuations remain sensitive to property yields - a 10 basis point increase in property yields would cut net tangible asset estimates by about 3%, with more highly leveraged companies likely to face larger NAV declines.
Rental growth has eased as inflation slows, with rents averaging 2.9% growth in 2025, down from the prior year. Within property subsectors, logistics assets have outperformed offices and retail in the UK, benefiting from stronger pricing power. Year-to-date performance has been led by Spanish real estate and retail, while German residential and student housing have lagged. Lower-leverage companies have generally outperformed those with higher debt burdens.
Transaction activity shows some resilience: European real estate investment volumes climbed 13% in 2025 to reach 241 billion euros, suggesting that investment activity has partially recovered despite tighter financing conditions.
Goldman maintains a broad slate of recommendations across the sector, with 14 stocks rated "buy" and four rated "sell," indicating the bank sees selective opportunities despite the ongoing macro uncertainty.
Market implications
- Rising sovereign yields and broader credit spread moves are pressuring real estate valuations across Europe.
- Sector earnings show limited immediate sensitivity to modest near-term rate rises due to high hedging proportions, while NAVs remain sensitive to property yield changes.
- Within real estate, logistics and Spanish retail have outperformed, while German residential and student housing have underperformed. Low-leverage names have generally held up better.