A new report by PwC and the Urban Land Institute (ULI) suggests a cautiously optimistic outlook for global real estate, with opportunities in data centres and energy infrastructure leading the way despite geopolitical and economic concerns.
According to the Emerging Trends in Real Estate Global Outlook 2025 report, despite lingering inflation, higher interest rates and geopolitical uncertainties, there’s growing optimism that the real estate industry is nearing a “reset point” and potentially entering a new cycle in 2025.
The report suggests market players are cautiously optimistic as transaction volumes see potential improvement and pricing clarity increases.
Political uncertainty, including potential policy changes, geopolitical conflicts, and trade disputes, is a major concern influencing financial markets and investment decisions globally. This is particularly true in relation to how policy and legislative decisions will influence monetary policy, the prospects for economic growth and the continuing impacts of global conflicts and disputes, according to the report.
While climate targets and the environmental, social and governance (ESG) agenda remain important, there is evidence of political pushback, particularly in the US, which is beginning to influence Europe and potentially Asia Pacific. However, 67% of the respondents, particularly in Europe, still cite environmental or decarbonisation requirements as important concerns.
According to the report, significant opportunities are emerging at the intersection of real estate and infrastructure, specifically in sectors like data centres, new energy infrastructure and logistics. These sectors are attracting record investor interest due to the rising importance of energy security, AI-driven expansion and regional economic independence.
Increased pricing clarity has supported transaction volumes, though lingering inflation, particularly in the US, could delay further recovery.
Europe is seen as being on a good trajectory, with central bank rate cuts and stabilised valuations. However, geopolitical tensions remain a concern. North America saw increased transaction volumes, boosted by anticipated rate cuts, but concerns over interest rates and inflation persist. Asia Pacific experienced varied performance, with some markets, like India and Southeast Asia, showing strong potential due to demographic factors, the report showed.
Lisette van Doorn, CEO, ULI Europe, said: “Our annual global weatherglass for real estate investment and development prospects shows that the industry is very keen to turn the page and start a new cycle on the back of lower inflation and subsequent initial interest rate cuts.
“However, wider (geo)political risks with potential monetary and macro-economic knock-on effects will lead to ongoing uncertainty for real estate investors and managers, and this calls for continued caution.
“Amidst this uncertainty, there are pockets of opportunity, largely driven by structural growth trends, such as demographics, digitisation and the energy transition. These developments drive where the money is being deployed.”
Thomas Veith, global real estate leader, PwC, said: “The global real estate markets are sending out positive signals. The trend towards operational real estate as a route to creating value is permeating nearly all investment categories. This brings with it the need for specialist, operational expertise, vertical integration, new partnerships and new investment constructs.
“In addition, our research suggests that the greatest opportunities for outsized returns lie with those assets at the intersection of real estate and infrastructure - with an acceleration of interest and capital deployment possible this year.
“One significant change is that every building block in the value chain of “investing in real estate” is being examined for its positive value contribution. ESG, availability of operational data, active management of office or the use of other building materials are being rethought. This process takes time but will encourage a lot of innovation. It will make the industry more resilient for the future, which is good and necessary.”
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