Global Real Estate Perspective, May 2026

• Economic implications of Iran conflict continue to evolve. The global economy once again experienced a state-altering shock during the first quarter with the outbreak of war in Iran. While the situation remains volatile, economic conditions are well placed to rebound if the disruption proves to be relatively short-lived.
• Global real estate activity resilient to disruption in Q1. Global office leasing demand remained healthy amid regional divergence. Industrial activity rose further in many major markets, while retailers continue to expand in prime locations.
• Capital markets enter the second quarter in a healthy state. Investors largely maintain a risk-on posture to capital deployment, boosted in part by strong momentum in credit markets. Asset pricing remains resilient, with catalysts for further growth in capital deployment.

The economic outlook remains volatile following the outbreak of conflict in Iran, with the implications still unfolding and uncertain. Even a swift resolution will leave lingering effects due to damaged infrastructure and disrupted supply chains. But the global economy was in reasonable shape in early 2026 with growth positive, inflation contained and interest rates near neutral, meaning it is well placed to rebound if the disruption eases.

Occupier activity was healthy but varied across markets and property types during the quarter. Despite longer deal timelines and declining new supply, requirements continue to increase in many industrial markets. Global office leasing was broadly level with the same quarter last year following a post-pandemic high set in 2025, while retailers are still expanding in prime locations.

Global capital markets exhibited continued growth in activity in the first quarter, driven by robust liquidity in debt markets, a continued uptick in transactions of scale and stability in pricing. Performance across property sectors remains strong, with office, industrial and logistics and retail posting the highest year-over-year growth rates. The overall interest rate policy environment remains supportive of commercial real estate transactions and investors are generally not deferring decisions in anticipation of any near-term policy shifts.

Global direct transactions volumes reached US$216 billion in the first quarter of 2026, rising 18% year-over-year. Asia Pacific recorded the strongest growth as investment increased by 31% year-over-year, with liquidity led by Japan while Singapore recorded its highest quarterly volume on record. In the Americas the U.S. and Canada both performed strongly and contributed to a rise of 25%. EMEA transactions fell by 2% year-over-year, coming off the heels of a particularly robust first quarter in 2025. The UK and Germany led liquidity in the region while Spain, Poland, the Netherlands and Portugal demonstrated impressive growth.

Cross-border investment finished up 37% year-over-year globally, reaching US$55 billion. While still below previous peak levels, this marks the strongest first-quarter performance since 2022, highlighting the continued improvement in capital markets dynamics even through geopolitical uncertainty. EMEA received 40% of cross-border investment while the Americas and Asia Pacific each received 30%, marking the most even distribution of cross-border capital on record.

Global office leasing demand remained solid in Q1 but activity was 1% lower year-over-year, marking a pause after nine consecutive quarters of annualized growth. Regional activity diverged with continued signs of pent-up demand in North America as volumes rose from Q1 last year, while leasing slowed in Asia Pacific and Europe. 

In the U.S., construction is at the lowest level on record, with over two-thirds of the remaining pipeline already pre-leased. A shrinking development pipeline in Europe also points to an increasingly tight market for modern, high-quality space. Occupiers looking for large-block options will need to explore options earlier and consider core-adjacent areas, with a growing need for refurbished second-generation space to fill the supply gap. In Asia Pacific, a number of markets including Japan, Singapore and South Korea are also seeing tightening conditions, although regional completions are set to rise this year due to new construction in India and China. 

Future trends: Focus on elastic portfolios and high-performance workspaces
 

Short-term: The economic outlook and occupier sentiment will continue to be influenced by the eventual duration and scale of impacts from the Iran conflict. But pent-up demand from renewals and higher office attendance in the U.S. and EMEA, combined with robust activity in India and cost-saving moves in China, are expected to support a continued gradual recovery in global office leasing through 2026.

Long-term: Declining availability of new construction and an uncertain outlook for headcount growth amid shifting working styles and technologies will put increasing focus on flexible portfolio management and ‘commute-worthy’ workplaces. With rising competition for pre-lets, companies will need to start searches earlier and incorporate more agile portfolio strategies. Renewals and extensions will account for a larger share of activity, with growing demand for refurbished second-generation space to fill the supply gap.

Leasing demand stayed strong through the quarter, although longer deal timelines and limited availability in some markets led to varying regional performance. North America continued to outperform with take-up led by expansion from 3PL providers and in big-box space, while regional take-up also increased in Europe as most markets saw a clear improvement in requirements to start the year. Demand in Asia Pacific remained healthy across most major markets, although absorption dipped slightly due to lower new supply in South Korea and reduced activity in Southeast Asia. Construction is still falling from peak levels in each region, which will contribute to plateauing or declining vacancy over the rest of the year.

Future trends: Strategic portfolio restructuring contributing to demand for modern space
 

Short-term: Supply chain disruptions, rising transport costs and continued trade policy adjustments have created a more complex decision-making environment for occupiers. While some tenants seek greater flexibility as they assess the impact on their operations, these pressures are also accelerating strategic portfolio restructuring. Structural drivers - including the regionalization of higher-value manufacturing, growing defence spending and rising e-commerce - position the sector for continued growth, driving steady requirements for modern distribution space.

Long-term: Lower levels of speculative construction will constrain availability of modern supply in core locations, contributing to rental growth for high-quality buildings. In mature markets, demand is concentrated on highly specified, modern assets in strategic locations. This will support further growth in owner-user and build-to-suit development to enable greater investment in customization and automation. With growing competition from other use-cases including data centers, access to reliable power will become increasingly critical in site selection.

Retail fundamentals continue to be resilient across regions with solid but highly selective leasing demand concentrated on prime locations. Absorption in the U.S. was positive during Q1 for Class A malls and general retail, while occupancy declined in lower-tier malls and power centers. In Europe and higher-growth or tourism-oriented economies in Asia Pacific, retailer demand continues to be healthy for premium central space.

Future trends: Stable fundamentals supported by limited availability

Short-term: Some retailers are becoming more cautious on expansion plans until the impact of higher occupancy costs and cautious consumer sentiment becomes clearer. Demand will remain focused on prime destinations and smaller formats to enable strategic expansions and portfolio rebalancing. Limited availability and new supply in many mature markets will support occupancy levels and maintain competition for newer, well-located space.

Long-term: Demand from services-led tenants and for flexible ‘experiential retail’ formats is growing, with stores acting as engagement hubs for brand connection, events and services that cannot be replicated online. An increasing bifurcation in spending patterns will contribute to pressure on mid-market retailers and lead to outperformance for premium and experiential segments as well as essentials.

Global living investment maintained its momentum in Q1 despite macroeconomic uncertainty. U.S. transactions were down slightly compared to the previous year but still 41% above volumes two years ago, and a rising forward pipeline is signaling strong pent-up demand. Listed investor activity contributed to growth in EMEA while Asia Pacific markets also demonstrated sustained institutional momentum.

Future trends: Structural tailwinds and rising allocations point to strong year for global investment
 

Short-term: Global geopolitical volatility and the recent energy crisis pose new uncertainty, although it is not currently affecting transactional volumes. While prolonged challenges may raise the risk of future central bank rate increases as well as heightened development and operational costs, structural tailwinds and rising allocations will support capital deployment through 2026.

Long-term: Living investors’ focus will increasingly broaden to include markets with institutionalizing residential sectors. The new emerging markets are likely to include India, South Korea, Portugal, Poland and China among others, driven by capital targeting specialized living formats which are optimized to their local demand profiles.

Global hotel performance in early 2026 was headed by strong RevPAR growth in Asia Pacific and Southern Europe. In the Americas, RevPAR growth was modest overall but meaningfully stronger in markets benefiting from major events and leisure demand, notably in Latin America and select U.S. cities. Hotel transaction volumes increased moderately with sustained but selective investor interest focused on quality assets and strategic opportunities.

Future trends: Quality assets benefit from structural shifts despite short-term disruption

Short-term: The ongoing Middle East conflict is impacting the global hotel sector through several key channels including disrupted air connectivity, increasing operational costs and airfares, and heightened consumer uncertainty. While structural demand for travel experiences remains robust, these disruptions are creating geographic winners and losers based on positioning and source market exposure.

Long-term: The global travel landscape continues to transform with emerging markets like India and Saudi Arabia reshaping future patterns through demographic and economic shifts. Limited new supply will accelerate brand repositioning and consolidation, while technology-enabled hyper-personalization will allow hotels to capture greater revenue from travellers’ increasingly diverse demands through bespoke service delivery.