Private wealth is buying real estate below replacement costs

Commercial real estate has reset across two continents.Pricing has adjusted in core European and Asian markets while construction costs have also surged. Different mechanics, same result: quality buildings are trading for less than it would cost to replace them. Institutional capital, still cautious after the impact of higher interest rates, financing costs and allocation pressures, has largely stayed on the sidelines watching it happen.

Private wealth, however, has moved decisively into the gap.

European markets moved first. The UK, France and Germany now offer quality assets trading below replacement cost in a way that hasn’t been possible since the financial crisis.

“If you're looking at an asset that is currently trading at a discount of around 20-30% compared to previous peaks, then on a long-term basis that represents good value, and when combined with future rental growth and solid fundamentals, then that’s a pretty mitigated risk,” explains Joseph von Maltzahn, head of private wealth for EMEA at JLL. “When you couple that with the question 'what would it cost to replace this building today?' and the answer is more than you're paying, your downside is well protected.”.

For many private investors, the opportunity came from simple market arithmetic. Pricing reset while construction costs stayed high and new supply slowed, making acquiring property below construction cost, and with limited supply, a rational strategy. This window is narrowing in some of the highly sought after city centres as rental growth starts to make up some of the lost value.

Private wealth responded decisively. The UK alone attracted more than €10.1 billion in private investment last year, up 66% from 2024. London secured €5.2 billion of that total, more than doubling its volume from the previous year.

In Asia-Pacific, the replacement cost argument works differently but leads to similar conclusions.

“Rising construction and labour costs are now investors’ top concern, overtaking interest rates for the first time,” explains Tim Graham, global lead, international and strategic capital, head of private wealth in APAC at JLL. “That's actually a bullish signal for existing well-located assets, because constrained supply creates rental growth potential in markets where occupier demand is healthy”.

Sydney exemplifies this dynamic. Construction costs, labour constraints and planning approval delays have pushed the all-in cost of delivering new prime office towers well above current acquisition pricing for quality existing buildings.

Tokyo presents a more selective opportunity. Prime Grade A offices in core wards still command premiums, driven by rent growth that has hit 18-year highs in some submarkets. But move to older buildings needing repositioning, and the replacement cost argument becomes compelling.

Singapore is the exception that proves the discipline required here. Cross-border inflows surged more than tenfold in Q1 2026, with international buyers representing 60% of activity. And yet core CBD assets still trade above replacement cost – buyers are paying for scarcity and income security.

That’s worth sitting with. The replacement-cost thesis is powerful, but it isn’t universal, and mistaking “cheap somewhere” for “cheap everywhere” is exactly how a strong strategy turns into a bad trade. Knowing which markets reward patience and which markets reward paying up for certainty is a judgment call, made market by market, building by building.

Across both regions, private investors are outcompeting institutional capital on certainty and speed rather than higher bids alone.

“There are examples in Germany where vendors have selected private bidders because the decision-making is much clearer and there’s perceived to be less execution risk,” Joseph von Maltzahn explains. In France, private investors have outbid institutions on edge-of-town office assets through faster, more straightforward processes rather than aggressive pricing.

Moving quickly and giving vendors confidence is relatively straightforward in a domestic market; doing the same internationally is far more complex. A structure that works cleanly in London may create a tax drag in Tokyo. A holding entity that satisfies a UK lender may raise questions for an Australian one. The certainty that wins deals in Frankfurt or Sydney comes from having already answered those questions before the vendor asks them – not from moving fast in general, but from knowing exactly which local relationships, structures and approvals remove friction in that specific market.

The same pattern holds in Asia-Pacific. “Private capital has been the largest source of funding for commercial real estate globally for four consecutive years,’ notes Tim Graham. "Many of the large institutional investors - including pension funds and sovereign wealth capital that dominated office and logistics investment throughout 2021 - pulled back as rates rose and denominator effects took hold. That created a window private capital moved into decisively.” Institutional investors often face longer approval cycles, committee scrutiny and quarterly performance pressures. Private wealth families can move faster, but the ones consistently winning deals are those that combine that agility with local partners who understand the market, know the process and have executed similar transactions before.

Private investors are targeting specific cities and are becoming more on opportunities.

In Europe, JLL recently sold best-in-class office and prime retail properties in London’s West End, trophy offices in Brussels, heritage development opportunities in Lisbon and multifamily assets in Milan, reflecting the variety of opportunities being targeted by private investors. The common theme that all of these properties have is that they are in unquestionable locations with excellent fundamentals.

In Asia-Pacific, private capital is concentrating into a narrower group of high-conviction markets. Although overall investment activity declined, private capital investment increased sharply in Hong Kong (+40%), Singapore (+93%), South Korea (+237%) and India (+1,378%). Japan also remained a major focus across office, multifamily, logistics and hospitality as private wealth shifted from tactical to more structural allocations.

Asset class matters less than fundamentals. Private wealth investors are active across office, retail, hotels and logistics in both regions. Location quality, building fundamentals and the ability to acquire at or below replacement cost with clear rental growth prospects unite these opportunities.

Not all private wealth capital behaves the same way. Two distinct strategies are working across both regions.

The first group pursues trophy assets in gateway cities – buildings on Bond Street, Saint-Honoré or prime Tokyo locations. These investors view real estate as generational wealth, prioritising location, prestige, security and long-term family ownership over higher returns.

“Some families will say "I really want to own a building on this street, and it's going to be a generational asset for the family,” Joseph von Maltzahn notes. “That's not the same as the opportunistic private investor who sees a gap in the market and wants to invest for different reasons”.

The second group operates more tactically. They identify mispriced assets, execute repositioning strategies and plan exits over three-to-seven-year horizons. These investors are active in secondary cities and emerging neighbourhoods within core markets, where pricing dislocations create stronger risk-adjusted returns. They also tend to work closely with local partners or dedicated in-market teams, recognising that successful execution depends on understanding local fundamentals, leasing dynamics and operational risk.

Both strategies thrive in today’s environment. Lower entry pricing across many core markets offers downside protection for trophy buyers, while the replacement cost dynamic creates value-creation opportunities for repositioning specialists.

Private wealth investors buying today are constructing foundations for sustained outperformance rather than timing a short-term recovery.

The ability to acquire quality, well-located assets below replacement cost – while construction pipelines remain constrained and institutional capital stays selective – offers downside protection and embedded value creation. It also represents a structural tailwind that may not persist indefinitely.

“The construction cost dynamic is now explicitly part of buying decisions in a way it wasn't eighteen months ago," explains Tim Graham. “When clients understand that building the equivalent of what they're buying today would cost 20 to 30% more and take four to five years, the acquisition case becomes much easier to make”.

Those who move decisively while this alignment exists are locking in entry points that could define long-term returns. As institutional capital returns more broadly and rental growth strengthens over the next market cycle, opportunities to acquire quality assets below replacement cost are likely to become increasingly limited. Market timing matters less than recognising when pricing, fundamentals and capital dynamics align to offer downside protection and appreciation potential. That alignment exists today across multiple global markets.

The families moving decisively right now aren’t the ones with the most capital – they’re the ones who could tell you, market by market, where the replacement-cost logic holds and where it doesn’t. That’s a narrower list than it sounds.

Joseph von Maltzahn (EMEA) and Tim Graham (APAC) lead JLL's Private Wealth coverage in these markets. Reach out to the team and we’ll help you explore opportunities aligned to your investment strategy.

Is now a good time to buy commercial real estate in Europe or Asia-Pacific?

For well-located, quality assets, yes – many are trading below what it would cost to build them today, which gives buyers downside protection that institutional capital currently isn’t moving fast enough to capture.

Why is private capital outcompeting institutional investors right now?

Private capital typically moves faster and holds through volatility better than institutional committees can, but that speed only wins deals when it’s paired with local execution – market-specific structuring, financing relationships and regulatory knowledge in each city.

Which markets currently offer the strongest replacement-cost opportunity?

Markets are becoming increasingly bifurcated. In core gateway CBDs such as London, Paris, Milan and Munich, prime assets can still command a premium because of scarcity and long-term income security. Outside the very best core locations, however, many quality assets are trading at or below replacement cost, creating opportunities for private investors able to take a longer-term view than more constrained institutional capital. Sydney and selective parts of Japan are showing similar dynamics.