As the world navigates a post-pandemic economic landscape marked by inflation and geopolitical tensions, the global real estate sector entered 2025 with cautious optimism. PitchBook‘s H1 2025 Global Real Estate Report paints a picture of stabilization after years of turbulence.
While fundraising and deal activity remain subdued compared to pre-2023 peaks, emerging signs of recovery—fueled by anticipated interest rate cuts and sector-specific resilience—offer hope for investors.
The report underscores how elevated rates continue to pressure valuations via higher capitalization rates, with contractual rents lagging behind, but nonbank lenders like private debt funds are thriving on floating-rate structures.
Interest rates remain a pivotal headwind.
The US 10-year Treasury yield and 30-year fixed mortgage rates hover at pre-Global Financial Crisis highs, while Germany’s 10-year bond yield sits at 2.6% and the UK’s at 4.6%.
These levels have triggered sector rotation in Real Estate Investment Trusts (REITs), with healthcare REITs leading the charge to offset earlier losses and datacenter operators proving immune to rate shocks.
However, distress signals persist: Commercial Mortgage-Backed Securities (CMBS) delinquency rates climbed to 7.1% by June 2025, largely driven by vulnerabilities in office, multifamily, and lodging sectors.
On a brighter note, the Green Street Commercial Property Return Index (CPRI) for North America notched six straight positive quarters through Q2, with price returns indicating building momentum.
Fundraising, a bellwether for investor confidence, reflects ongoing caution but hints at a turnaround.
After sharp declines—26.9% year-over-year in 2023 and 30.7% in 2024—H1 2025 commitments reached $67.3 billion, already surpassing the full-year 2024 total of $109.1 billion? Wait, no: actually outpacing 2024’s pace.
Yet, the average fund closing time has stretched to 28.7 months, up from 22.0 in 2015, signaling allocator hesitancy.
Dry powder dwindled to $423.6 billion in 2024, a $50 billion drop from 2023—the first since 2012—while emerging managers captured just 13.1% of capital in 2023-H1 2025, well below their 26.9% historical average.
Regionally, North America dominated with 53% of H1 inflows, though down from a 62.9% decade average, as Europe (27.8%) and Asia (18%) gained ground, exceeding their 2024 hauls in the first half.
Strategy-wise, opportunistic and value-add funds snagged 77.9% of commitments, underscoring a preference for higher-risk, higher-reward plays.
Debt strategies shone, drawing $12.9 billion through Q2 versus $25 billion for all of 2024, benefiting from floating rates in a high-yield environment.Sector performances reveal a tale of divergence.
Industrial and logistics assets continue to outperform, buoyed by e-commerce and supply chain reshoring, with valuations holding firm.
Residential markets grapple with affordability crunches, exacerbated by construction cost inflation and policy uncertainties like US trade tariffs.
Office spaces face structural headwinds from remote work, contributing to delinquency spikes, yet adaptive reuse projects show promise.
Healthcare and datacenters emerge as bright spots, with REIT total returns surging double-digits post-July 2023 rate peaks.
Globally, deal activity—measured by transaction volumes—edged up modestly, with H1 2025 volumes at $250 billion, a 5% increase from H2 2024 but still 40% below 2021 highs.
Valuations stabilized, with cap rates compressing slightly in resilient sectors like industrial (averaging 5.2%).
Europe saw robust activity in logistics, while Asia’s multifamily segment benefited from urbanization trends.
Looking ahead, the report’s cautiously optimistic forecast hinges on monetary policy easing.
The Federal Reserve’s rate cut could catalyze further yield compression, though risks from economic slowdowns and supply constraints loom large.
PitchBook analysts emphasize diversification into debt and niche sectors, warning that without broader rate relief, recovery may remain uneven.