Search
In 202526, international real estate enters a pivotal moment where macroeconomic shifts and evolving investor preferences converge to reshape property markets worldwide. This comprehensive analysis navigates the forces driving value, risk, and opportunity across major sectors and regions.
After a notable downturn between 2022 and 2024, the global property landscape has entered a recovery, marked by sustained growth and renewed confidence. According to industry benchmarks, private real estate values have experienced five consecutive quarters through Q2 2025, delivering positive total returns across 21 countries. Transaction volumes have rebounded sharply, reaching USD 739 billion, up 19% year-over-year, as investors recalibrate portfolios in response to shifting valuations.
Investor surveys from ULI/PwC reveal that sentiment is at a two-year high, yet risk aversion persists around political instability and supply chain shocks. Market watchers describe a “corrugated recovery,” with asynchronous rebounds across geographies—Europe benefiting early from rate cuts, Asia grappling with deflationary pockets, and the U.S. balancing moderate growth against sticky inflation.
With major central banks hinting at a turning point with easing interest rates, liquidity conditions are improving. Forecasts anticipate lower benchmark rates in Europe, a normalization in Asia, and a gradual decline in U.S. inflationary pressures, setting the stage for capital flows to re-enter the sector.
As the new cycle takes shape, forecasts diverge on near2term capital values and income returns. UBS projects weaker price appreciation across most regions in 2025, though sectors backed by robust rental growth offer a buffer. Residential assets are expected to outperform, benefiting from structural demand drivers.
M&G highlights that lower entry prices + strengthening rental growth underpin compelling total return potential, especially for prime properties. Investors should anticipate some degree of yield compression in best2in2class assets as risk appetite returns, while secondary and older assets may face structural challenges and funding strains.
The investment landscape exhibits clear asset bifurcation between prime and secondary tiers. Prime, well-located properties command deep pools of capital and signal the first compression in yields as markets reprice. Conversely, secondary and value-add opportunities appeal to investors willing to navigate complexity, with risk premiums reflecting refinancing headwinds and occupancy uncertainties.
Transaction activity has gained momentum on both buy2side and occupier fronts. JLL reports direct investment of USD 213 billion in Q3 2025, a 17% year2on2year uplift, with office leasing at a six2year high. Industrial and logistics leasing continues to surge, driven by supply2chain re-engineering and e2commerce expansion.
Living sector investment is accelerating, with global volumes on track to surpass pre2COVID peaks. U.S. multifamily leads, driven by tech-hub migration patterns, while European student housing benefits from rising enrollment in international study programs. In Asia-Pacific, senior living facilities are emerging as institutional-grade assets.
Occupier demand varies by region and sector. Core logistics corridors in North America and Europe are witnessing record absorption, while office demand remains polarized. Prime office assets in gateway cities maintain strong tenant pipelines, whereas secondary markets await clearer recovery signals.
Cross-border capital remains a cornerstone of liquidity, with sovereign wealth funds from the Middle East and pension funds from North America and Europe actively seeking diversification in Asia-Pacific and Latin America, where yields are more attractive and structural growth prospects are robust.
The global housing shortage remains acute, with Hines estimating a net shortage of 6.5 million housing units in key developed economies. This imbalance fuels high rent growth and underpins investor interest in multifamily, student accommodation, and senior living.
Institutional investors are scaling living portfolios, with U.S. multifamily and European PBSA leading volumes back to pre2COVID norms. In the U.S., J.P. Morgan forecasts house prices will rise about 3% in 2025, supported by a durable wealth effect and constrained resale inventory. Renters dominate markets in major cities, with over 80% of households in developed regions favoring renting due to affordability challenges.
Office markets are at a crossroads, featuring a clear flight to quality as tenants and investors prioritize location and building standards. CBRE expects U.S. vacancy to settle around 18.9% by year2end 2025, with prime properties in Manhattan, San Francisco, and Dallas bucking the broader trend through strong leasing momentum.
Regional divergence is stark: Asian gateway cities are recalibrating leasing strategies to accommodate hybrid models, while European capitals witness modest net absorption in top-tier buildings. Older stock and poorly located assets face structural obsolescence, prompting capital to concentrate on sustainable, flexible workplaces.
Logistics remains the darling of the cycle, with fundamentals powered by global trade stabilization and e2commerce tailwinds. Columbia Threadneedle cites robust activity in main corridors, while M&G warns that secondary sites must compete with modern facilities or risk underperformance.
Third2party logistics providers are expanding rapidly, accounting for a growing share of leasing activity. Investors are structuring leases to capture inflation2linked rent escalations and durable contract terms, ensuring predictable income streams in an otherwise dynamic environment.
Beyond cyclical factors, long-term structural themes are redefining property markets. Demographic shifts, climate risk, and regulatory frameworks are influencing how assets are developed, operated, and valued.
Urbanization and aging populations are boosting demand for multifamily and senior living. Technological advances like AI-driven building management systems and digital twins improve asset performance and tenant experience. Meanwhile, ESG considerations drive capital toward green-certified buildings and resilient infrastructure, as investors price climate risk and decarbonization pathways. Regulatory changes—ranging from zoning reforms to tax incentives—are shaping development pipelines and investor returns, particularly in major global hubs striving for sustainable growth.
In this nuanced environment, investors and developers must blend macro awareness with deep local market insights. Embracing data-driven decision-making and prioritizing quality assets will be critical. Diversification across sectors and regions can mitigate risk while capturing pockets of growth in living, logistics, and prime office markets. As interest rates stabilize and liquidity returns, a disciplined approach to asset selection and active management will unlock the next wave of opportunity in international real estate.
By staying attuned to evolving macro drivers, capital market dynamics, and structural themes, stakeholders can navigate the 202526 cycle with confidence and purpose, ensuring resilience and sustainable growth in an ever-changing landscape.
References
