Global real estate market outlook

The global real estate market is entering a new phase after one of the most challenging adjustment periods in modern history.  

The sharp rise in interest rates, changes in how people live and work, and tighter lending standards have reset both valuations and investor expectations.  

While parts of the market remain under pressure, the foundations of a more sustainable, income-driven cycle are now emerging.

For investors, the focus is shifting from rapid capital appreciation to disciplined asset selection, operational performance and long-term resilience.

Real estate remains the world’s largest store of wealth. Global real estate advisor Savills estimates that total global real estate value was over US$393 trillion at the start of 2025 (residential, commercial and agricultural). 

Over the past three years, global property markets have undergone a broad repricing as higher borrowing costs reduced asset values and slowed transaction activity. This recalibration, while painful, has helped restore more realistic relationships between income, price and risk.

Liquidity has gradually improved in prime segments as buyers and sellers begin to align on price expectations. The market is moving away from highly leveraged, momentum-driven investment and towards a more balanced, fundamentals-based approach.

In the ‘living’ sector specifically, global real estate services company Jones Lang LaSalle (JLL) reports 2025 global transaction volumes up 24% year-on-year, with the US accounting for about two-thirds of investment. That matters because living assets (multifamily, student, seniors) are becoming a core destination for capital seeking long-duration demand rather than cyclical luck.

Investors are no longer chasing yield at any cost. Instead, they are prioritising durability of cash flows, tenant quality and long-term use-case relevance. 

1. Refinancing pressure

One of the largest structural challenges remains the volume of debt approaching maturity. 

Assets financed during periods of ultra-low interest rates now face significantly higher refinancing costs. This is creating:

• pressure on debt service coverage
• rising default and restructuring risk
• increased likelihood of asset sales under stress.

This risk is most concentrated in older office stock and lower-quality retail properties, but it extends across multiple asset classes in highly leveraged markets.

2. Office market disruption

Office real estate remains the most structurally challenged segment. 

Hybrid and remote working models have permanently altered demand patterns. Many secondary office buildings face long-term obsolescence unless they are heavily refurbished or converted.

The performance gap between modern, well-located, sustainable buildings and outdated stock continues to widen. 

Investors increasingly view offices as an operational business requiring repositioning rather than passive ownership.

3. Regulatory and political uncertainty

Real estate is increasingly influenced by public policy. 

Rent regulations, energy-efficiency requirements, zoning changes and foreign ownership rules are reshaping risk profiles across markets.

Political cycles and geopolitical tensions are also contributing to capital hesitancy, particularly in cross-border investment activity.

4. Climate and environmental risk

Buildings that fail to meet evolving environmental standards are facing reduced demand, rising operating costs and more limited access to financing. 

Environmental compliance is no longer a reputational issue – it has become a core financial variable in valuations and underwriting.

Despite the challenges, several segments are positioned for structural growth.

a. Residential and ‘living’ real estate

Housing shortages, urbanisation and demographic shifts continue to support strong fundamentals in residential property. Investor interest is rising in:

• build-to-rent housing
• student accommodation
• senior living and assisted care.

These assets typically provide stable, defensive income streams and benefit from long-term structural demand.

b. Logistics and industrial property

Industrial property remains a key beneficiary of supply-chain restructuring. Companies are holding more inventory, relocating production and investing in distribution infrastructure. 

While rental growth has moderated from peak levels, long-term demand remains fundamentally strong in well-connected locations.

c. Data centres and digital infrastructure property

One of the fastest-growing areas of real estate sits at the intersection of property and infrastructure. 

Demand for data centres is accelerating as cloud computing, artificial intelligence and digital services expand globally. Reported global data-centre investment reached a record ~US$61bn in 2025 (S&P Global Market Intelligence).

These assets are capital-intensive and complex to operate, but they offer the potential for long-duration, predictable cash flows where supply is constrained.

d. Retail and hospitality

Retail is no longer a uniform story of decline. 

Necessity-based retail, convenience formats and dominant regional centres in strong catchment areas are performing more resiliently. 

Hospitality assets linked to leisure and experience-based travel are benefiting from robust consumer demand in many markets.

The role of real estate within institutional portfolios is also changing.

• Investors are allocating more capital to private real estate debt as an alternative to bank lending.
• Conservative leverage structures are favoured over aggressive capital stacks.
• Active asset management is now central to value creation rather than financial engineering.

The market is increasingly separating sophisticated, well-capitalised operators from passive owners.

North America

The US market remains highly polarised. Certain office sectors continue to face sharp value corrections, while industrial, housing and specialist sectors retain strong investor interest.

Local banks’ exposure to commercial property remains a focus point, supporting the growth of private credit and alternative financing vehicles.

Europe

European real estate has benefited from relatively conservative financing practices and stronger tenant protections in many jurisdictions. Residential and logistics assets remain preferred sectors, while prime office opportunities are emerging selectively where pricing has adjusted.

Asia Pacific

Asia Pacific displays wide variation. Growing urban populations and infrastructure development support long-term demand, particularly for housing and logistics, though political and policy risk remains more influential in some markets.

For investors, the next phase of global real estate will reward discipline over speculation. Core principles include:

• prioritising asset quality and location over headline yield
• stress-testing refinancing and interest-rate exposure
• budgeting realistically for capital expenditure and sustainability upgrades
• diversifying across sectors with different demand drivers
• treating real estate as an operating business, not just a financial asset.

Global real estate is not facing a structural collapse. Instead, it is undergoing a long-overdue recalibration. 

The rapid expansion of the past decade has been replaced by a more mature market that favours operational expertise, balance-sheet strength and strategic patience.

The strongest opportunities are emerging in sectors aligned with long-term societal and technological change – housing, logistics, data, energy and demographic-driven demand.

While risks remain, the current environment provides a more attractive entry point for disciplined capital than the overstretched markets of the past cycle. 

For investors willing to think long-term, accept complexity and focus on asset fundamentals, global real estate continues to offer a compelling role within diversified portfolios. With the world’s largest asset class, even modest re-acceleration in capital flows has outsized effects.

Contact our global real estate team: Mike Kamienski, Andreas Griesbach and Atul Kariya.

Acknowledgements

We would like to acknowledge Joe Nellis CBE, emeritus professor of global economy, for their insights in the development of this piece.