Global Real Estate Perspective, August 2025

• The global economic narrative continues to be dominated by an unpredictable geopolitical and trade policy environment. While the evolving outlook has weighed on business confidence, real economic effects have been limited so far and most major markets are expected to see positive growth this year.

• Global real estate markets held firm during the second quarter. Uncertainty is delaying some decision-making in industrial markets, adding to the pipeline of future transactions. Retailer demand for quality space remains robust while global office leasing rose.

• Capital markets activity is still increasing, supported by liquid debt markets and an increase in larger-scale transactions. Direct transactions rose further in the second quarter despite a moderation in the pace of growth, evidencing that investors continue to deploy capital through volatility.

U.S. trade and tariff policy continued to dominate the global geopolitical and economic narrative in the second quarter of 2025. Financial markets were unsettled and business confidence was fragile, although real economic effects were contained. The outlook remains dynamic but most major markets are expected to see positive growth this year and the direct impact on real estate has been limited. 

Occupier activity was varied during the quarter, with mixed performance across markets and property types. Many industrial tenants are reviewing the impact of new tariffs on their supply chains. At the same time, retailer demand remains strong for quality space while global office leasing rose further to mark its strongest first half of the year since 2019.

The quickly changing tariffs, subsequent retractions, exemptions and pauses since April have resulted in multiple junctures where uncertainty rose for investors. However, sentiment generally improved throughout the second quarter and equity markets rebounded quickly from their post-Liberation Day lows. In a testament to the relative health of real estate as an asset class, pricing held firm during the second quarter, while debt markets remain active and fundraising has turned a corner after several challenging years.

Direct transaction activity totalled US$179 billion in the second quarter of 2025, rising 14% year-over-year. This marked a deceleration of growth from the first quarter, but brought volumes over the first half of 2025 up 21% from H1 2024. Initial forecasts for 2025 projected a gradual recovery throughout the year, though given the deceleration seen during the second quarter, more of this growth is likely to shift to the second half of the year. Transaction volumes in the Americas reached US$99 billion in Q2, rising 18%. EMEA investment activity showed moderate growth in the second quarter, rising 6% year-over-year to US$49 billion. In Asia Pacific, second quarter volumes were US$31 billion, up 15% year-over-year.

Cross border investment continued to improve from the trough in 2023, rising by 21% over the year. Asia Pacific registered an 87% increase, followed by growth of 28% in the Americas at 28% and 6% in EMEA. The U.S. alone saw cross border capital increase 26% from the previous year.

The share of capital invested across property sectors fluctuated during the first half of 2025. Living remained the most investable sector in the second quarter, while office rose to second place, propped up by large transactions. Trade concerns following the Liberation Day announcements led to a slight moderation in investment performance for industrial assets. Overall investment in retail continues to recover, supported by steady consumer spending and low vacancy.

Office leasing demand held firm in Q2, with global take-up moderately higher over the year. Growth in most major markets across Asia Pacific drove an increase in regional leasing, while longer deal timelines in the U.S. and Europe contributed to marginal declines. Following on from a strong first quarter, global volumes over the first six months of the year were at their highest level since 2019.

Groundbreakings have fallen to a new record low in the U.S. with three quarters of the remaining pipeline already pre-leased, while new construction starts are at the lowest level in over a decade in Europe. This is expected to contribute to vacancy beginning to fall in both regions this year. With less new space coming to the market, occupiers with large requirements will need to explore options earlier as competition for the best space intensifies.

Future trends: Focus on refining workplace strategies to maximize value

Short-term: Although an unpredictable economic outlook is leading to longer search and deal execution timelines, higher utilization targets, reduced downsizing rates and centralization as tenants upgrade into higher-quality space are expected to support growth in leasing through 2025.

Long-term: Rising utilization targets are creating a need for more data-driven occupancy analytics and space design to enable higher density, control operational costs and support diverse work needs. In order to maximize the strategic value of space decisions, companies will need to utilize more advanced data collection and flexible workplace layouts, while being proactive in securing available space.

Industrial leasing activity slowed across regions during Q2 as companies remained cautious and focused on short-term flexibility amid shifting trade policy negotiations and timelines, although the impacts were mixed across markets and industries.

Future trends: Longer-term supply chain configurations remain in flux

Short-term: Shifting tariff and trade negotiation timelines are set to continue impacting planning and inventory strategies into H2 2025 and beyond. Many companies are continuing to focus on flexible short-term solutions, while delaying longer-term decision-making. However, demand from 3PL and distribution companies, businesses less exposed to trade restrictions and manufacturing requirements are rising in many markets.

Long-term: The longer-term shape of trade policies and supply chain reconfiguration is still evolving, which will continue to slow overall decision-making for companies dependent on cross-border trade until greater clarity emerges. Markets less exposed to international shipments will see more limited impact, while deferred decisions are likely to add to the pipeline of future transactions. Structural drivers including the regionalization of higher-value manufacturing, rising e-commerce and urbanization will underpin future growth.

Consumer sentiment and retail sales were muted in many major markets during Q2 amid concerns about the economic outlook and inflation. Retail market performance was varied; the increasing number of store closures in the U.S. contributed to a second consecutive quarter of negative net absorption, although the market remains supply-constrained for newer, Class A space. In Europe and higher-growth or tourism-oriented economies in Asia Pacific, retailer demand remains healthy for premium central space.

Future trends: Robust demand for quality space amid supply chain volatility

Short-term: Divergence in retail market performance is likely to continue through 2025. In the U.S., inflation impacts have been limited so far but are expected to increase during the second half of the year. Retailers continue to assess the impacts of evolving trade policy on supply chains and to explore options including building inventory and seeking alternative suppliers. Prime locations in mature markets will remain supply constrained amid limited development.

Long-term: Tourism has become a major contributor to retail spending in many major cities globally, accounting for up to 65% of annual revenue in some of the most popular destinations. Following decades of growth in global tourism, the focus is increasingly shifting towards attracting high-end visitors and tapping into their spending power. With overtourism a growing issue and some locations highly dependent on visitors from individual countries, a number of markets are looking to offset visitor numbers and concentration risk by targeting high-end tourists.

The U.S., Germany and UK were again by far the three most active living markets globally in Q2, although all three saw volumes decline compared to Q2 2024. Overall living investment increased over the year, however, driven by strong growth in the Nordics, Japan and Australia among others.

Future trends: Positive signs point to a strong second half of the year for global living investment

Short-term: A strong investment pipeline in the U.S. and a rebound in fundraising activity in Europe point to a robust H2 2025 investment market. Notable growth is expected in U.S. multi-housing alongside European living subsectors such as PBSA and later living. Platform and entity deals are likely to become a more common feature of the market as large funds pursue scale.

Long-term: Declining borrowing costs and continued increasing capital allocations will see the living sector cement its position as the world’s largest real estate investment sector. The ongoing failure to meet housing demand in major markets such as Canada, UK, Germany and Australia will drive greater cross-border capital deployment.

Global RevPAR maintained its record-setting pace through the first five months of the year, growing by 5.2%. Though RevPAR rose year-on-year in all three regions, growth slowed in Asia Pacific and the Americas. Markets with strong domestic and intraregional travel, such as Europe and the Middle East, are continuing to see performance accelerate.

Future trends: Global hotel brands increasing strategic use of their balance sheets

Short-term: Hotel brands are increasingly using their balance sheets to fuel net unit growth via M&A, strategic partnerships and conversions. More brand M&A is expected to materialize throughout 2025 as global hotel supply will grow only 1.4%. Third-party hotel management companies, non-traditional lodging brands, and hotels in the lifestyle sector are likely to attract the most capital.

Long-term: The global hotel operating model is undergoing a significant shift as the major brands prioritize unit growth over management contracts. As a result, the global portion of franchised hotels (i.e., those managed by third parties) has grown by 4.6 percentage points over the past 18 months and should increase further. This will create opportunities in the highly fragmented third-party management space with new players, increased partnerships and M&A likely to emerge.

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