Goldman Sachs Sees Value in European Real Estate Stocks Despite Sharp Selloff

European real estate stocks have taken a significant hit since late February, tumbling roughly 14% as rising bond yields and widening credit spreads weigh heavily on the sector. According to Goldman Sachs, valuations have now fallen to levels not seen since the 2009 global financial crisis, creating what the investment bank describes as a compelling entry point for investors.

The sector currently trades at a 40% discount to 12-month forward net tangible assets, far exceeding its long-term historical average discount of 19% recorded since 2000. Earnings yields have climbed to 8.1%, well above the historical norm of 5.9%, while the sector trades at just 13.5 times forward earnings — among the lowest across European industries on a historical basis.

The decline follows a surge of 40 to 70 basis points in UK and European 10-year government bond yields, alongside an 18 basis point widening in credit spreads, triggered by heightened geopolitical tensions in the Middle East. In response, Goldman Sachs revised its macroeconomic outlook, cutting its 2026 eurozone growth forecast to 0.7% and UK growth to 0.6%, while slightly raising inflation projections.

Despite the challenging environment, Goldman believes current prices represent an attractive opportunity, estimating roughly 20% average upside potential after adjusting price targets down by 6% to account for higher funding costs. The bank upgraded Klepierre and Landsec to "buy" while downgrading Big Yellow to "sell."

Importantly, near-term earnings remain relatively shielded from rate increases, with an average 87% of sector debt hedged. However, asset valuations stay sensitive to yield movements, with every 10 basis point rise in property yields reducing net tangible asset estimates by approximately 3%.

European real estate investment volumes grew 13% in 2025 to 241 billion euros, signaling cautious recovery momentum. Goldman currently holds 14 "buy" and four "sell" ratings across the sector.