After a turbulent few years, global real estate capital markets have shown clear signs of recovery throughout 2025. By the end of Q3, global investment turnover reached approximately $633 billion – an 10% increase year-on-year. While still below pre-pandemic highs, the rebound is broad-based across geographies and sectors.

Debt costs fall and values stabilise

A key catalyst for this recovery has been falling debt costs. Initially driven by interest rate cuts, the trend was further supported by increased investment in debt as banks and alternative lenders re-entered the market with renewed appetite. Since mid-2025, sentiment has continued to improve even as long-term bond yields remained relatively stable.

This cautious optimism was bolstered by the stabilisation of capital values. Following almost two years of repricing, global property values appear to have bottomed out. This has allowed buyers and sellers to align expectations and transact with greater certainty. Lower debt costs and stabilising capital values have made debt accretive to returns once again. This return of debt as a value-enhancing tool has been a game-changer.

Deal sizes increase

The interplay between stabilised pricing, reduced debt costs, and improved return expectations is now evident in the transaction market, most notably in the increase in deal sizes. Across all sectors, the average global transaction size in Q3 2025 reached US$17 million – the highest third quarter since 2022. This trend has been particularly pronounced in offices, where global turnover of deals above US$100 million in Q3 was 38% higher than in 2024.

Increased deal sizes offer a tangible measure of sentiment; larger transactions carry greater concentration risk from both equity and debt perspectives. But they’re also an important signal of the type of investor back in the market, with major domestic and cross border institutional investors becoming more active in deal-making. As market conditions improve and institutional investors return, so too will core capital.

2026 forecasts encouraging

The forecasts for 2026 are encouraging. Global investment is expected to rise by 15% year-on-year, with the EMEA region projected to lead with a 22% increase in turnover, followed by North America. Asia Pacific, while more mixed due to China’s slower recovery, is still expected to post positive growth in 2026, driven by rising activity in Japan, South Korea and Australia.

A key foundation of this recovery will be the release of pent-up activity. On the demand side, dry powder remains abundant and global institutional target allocations to real estate are holding steady at 10.8%, with some tailwinds arising from a positive denominator effect, underpinned by rising global equity markets. On the supply side, many investment funds previously delayed listing assets; now that pricing has stabilised and institutional capital is returning, some of these are likely to be brought to market. This recovery in transactional activity and liquidity supports price discovery and builds momentum, strengthening overall activity.

With forecasts pointing to continued growth and institutional capital returning, the outlook for 2026 is positive. The market may not return to its pre-pandemic highs, but the foundations for a sustained recovery are in place. For investors willing to act decisively, this could be the moment to capitalise on a market that is regaining its stride.

Further information

Contact Charlotte Rushton