As 2025 draws to a close, the story of real estate is one of recovery and renewed conviction. After several turbulent years marked by interest rate volatility and market dislocation, the landscape has found its footing. Capital markets have reopened, and the era of ultra-low rates is clearly behind us. Banks are lending again, insurers and alternative lenders are active, and transaction volumes have surpassed 2024 levels across nearly every property sector — from industrial to multifamily, retail and even office.1
Research shows that this rebound has been broad-based: commercial mortgage-backed securities (CMBS) issuance has more than tripled since 2023,2 while private credit markets are financing an increasing share of new deal activity.
Prices also appear to have found a floor after valuations began stabilizing in early 2024, and buyers and sellers have come to terms with higher base rates as the new normal. Meanwhile, new construction has slowed sharply, which paired with elevated replacement costs, is supporting existing values.
Additionally, against a backdrop of policy uncertainty, tariffs, and labor constraints, commercial real estate has demonstrated resilience.
And perhaps most strikingly, AI has emerged as a new growth engine for the sector, driving one of the most capital-intensive buildouts in modern real estate history. Barclays estimates over $2.3 trillion has already been committed to data centers this year, with another $3 trillion expected through 2028.3
In short, the AI buildout isn’t just changing how projects are financed — it’s poised to influence what they cost, with potential ripple effects across every property sector.
Looking ahead, 2026 is shaping up to be a year of both continued recovery and reinvention in real estate — one that rewards scale, specialization and flexibility. Three areas stand out.
With public equities trading near cyclical all-time highs and at stretched valuations, private real estate may offer compelling relative value. The NCREIF ODCE Index — a benchmark of core institutional real estate funds — has now posted several consecutive quarters of positive total returns, signaling a market regaining momentum.
Moreover, structural shifts are expanding access. The inclusion of private market investments such as real estate in defined contribution and 401(k) plans paves the way for deeper liquidity and stronger investment flows, even as returns remain tied in part to broader economic and rate dynamics.
In Europe, opportunity is being driven by a fragmented lending market. With the ECB’s deposit rate near 2% and valuations having reset, deal activity is accelerating. Yet the region still lacks an integrated securitization market (limiting liquidity and making it harder to recycle capital) and many traditional lenders remain cautious. For global platforms with the scale and structuring capabilities to operate across borders, this environment can offer attractive spreads. Breadth of capabilities and reliability of execution are increasingly what allow managers to capture these opportunities — and to lend in ways smaller institutions cannot.
Housing remains one of the most powerful, long-term investment themes in global real estate. The US is expected to face a shortfall of roughly four million homes by 2029.4 Meanwhile, Europe’s affordability crisis continues amid chronic underbuilding. New housing starts have fallen sharply due to elevated financing costs and regulatory bottlenecks, tightening supply through at least 2026.
At the same time, the cost of owning a home has nearly doubled relative to renting. This widening gap is fueling sustained demand for multifamily, manufactured, student and senior housing — along with build-to-rent models.
For investors, the takeaway is clear: housing isn’t just cyclical; it’s structural — no pun intended. Limited supply, demographic tailwinds and resilient income fundamentals can make this one of the most durable areas in real estate credit and equity.
Seizing these opportunities will require more than capital — it will demand adaptability and deep operational expertise, in our view.
First is the importance of vertically integrated managers — those with in-house operating platforms to drive alpha generation at the property level. We believe firms that integrate high-touch asset and property management will be better positioned to respond to market shifts and capture incremental value others miss.
Second, scale matters. The next wave of real estate credit (financing AI infrastructure, housing development and sustainability-linked projects) will require capital that can move with speed and precision. We believe managers with established platforms, a global presence, stable capital bases and strong relationships with borrowers are best positioned to meet this demand responsibly.
We see 2026 as the convergence of cyclical recovery and structural transformation. Capital markets are open, valuations have reset and foundational sectors like housing are underpinned by enduring demand. Meanwhile, technology and tighter investment discipline are reshaping how capital is deployed across the sector, influencing everything from underwriting to execution.
For allocators, this is a year of opportunity. Real estate has emerged from the reset — stronger, broader and more integral to the future of private markets.
