Global commercial real estate investment in the first half of 2025 was broadly unchanged from the same period last year. The recovery in investment turnover has not built on the momentum established during the second half of 2024, with high interest rates and a volatile macroeconomic backdrop weighing on investor behaviour. Liquidity measures remain sharply lower than historical benchmarks.

Nevertheless, we still see a market that is recovering, albeit more tentatively. Our investment forecasts, covering the major real estate markets that account for more than 90% of global activity, expect turnover to rise by 8% in 2025. This compares with our previous forecasts from October 2024, where we anticipated growth of 27%.

This downward revision to the forecast is partly about base effects – a stronger than anticipated end to 2024 means a lower growth rate is required to achieve the same level of turnover in 2025. But equally, total investment in 2025 is now forecast to be 11% below our previous expectation, reflecting the weaker first half and a more cautious outlook. We expect this difference to be gradually recovered over subsequent years.

Global commercial real estate investment

Source: Savills Research using MSCI RCA, Macrobond, and Oxford Economics. Based on independent reports of properties and portfolios. Excluding development sites. Note: Forecasts include Australia, Canada, China, France, Germany, Hong Kong, India, Italy, Japan, the Netherlands, Singapore, South Korea, Spain, Sweden, UK, and US, representing over 90% total global turnover.

All regions have seen a downward revision in forecasts for 2025. In Europe, we now expect total investment to grow by 16% in 2025, compared with 28% previously. A similar dynamic is evident in Asia Pacific, where a significant downgrade in our expectations for China weighs heavily on the region. Overall investment is forecast to fall by 7% in 2025 as a consequence.

In North America, we expect investment to rise by 13% in 2025. While this is again lower than our previous forecasts, this is nevertheless encouraging and follows a reasonable start to the year. As these regional figures are aggregated in USD terms, growth will be a little weaker in local currencies, owing to a notable depreciation in the USD since the beginning of the year.

Strengths and achievements

The pre-conditions for recovery remain in place, supporting a positive medium-term outlook for investment. We expect investment to rise by 24% in 2026, surpassing the $1tn mark globally.

Measures of market sentiment have largely returned to long-term averages, after dropping in the wake of the sharp rebasing in interest rates in 2022-23. Pricing has stabilised, amid a growing acceptance of fair value among both buyers and sellers, and there is plenty of debt capital available for the right assets.

Global commercial real estate sentiment

Source: Savills Research using Macrobond and Property Council Australia

Most sectors and regions are now seeing positive growth in total returns, underpinned by a bottoming out in capital values and robust income growth. This is driven by continued broad-based strength across occupational markets, as tenants face growing competition for best-in-class buildings and prime locations. In many locations, this represents the primary value proposition for real estate in the current market.

A squeezed pipeline of new construction will continue to support this dynamic. Some developers are struggling to break ground on new projects, amid higher build costs, financing challenges, labour shortages and other logistical and regulatory headwinds. Meanwhile, despite a challenging fundraising environment, there is still significant unallocated dry powder. Major institutional investors are also showing few signs of pivoting away from real estate as an asset class.

Behind the headlines, there were some notable achievements in H1. The US office sector is turning a corner, with investment rising by 10% in the first half of 2025. This comes off a low base, but there is a clear shift in sentiment towards US offices, as shown by several marquee transactions notable both for their size and the profile of active buyers. There is also a growing interest in the retail sector globally.

In both sectors, the post-Covid-19 doomsday prophecies have not come to pass. Investors are finding opportunities through a combination of a repricing in assets (relative to the popular ‘beds and sheds’) and continued resilience in occupational dynamics.

There is also an encouraging recovery in trophy asset sales, linked to growing momentum in the office sector. This dynamic is self-fulfilling: a recovery in liquidity for larger deals will encourage more vendors to bring assets to the market.

Areas for development

However, areas for improvement remain as we look ahead to the rest of 2025 and into 2026. Liquidity in global real estate capital markets – as measured by the ratio of annual investment to the overall size of the institutional real estate market – is around half that of the post-global financial crisis average. Assuming there is little change to the general strategy of major real estate investors – who typically work on a five-to-seven-year investment horizon – then it would imply that the current level of turnover is well down on what would be expected under more normal market conditions.

Liquidity of global real estate capital markets

Source: Savills Research using MSCI Real Capital Analytics.
Note: Turnover ratio illustrates annual investment as a share of the total size of the professionally managed real-estate market.

There remains a lack of active core and core+ capital. This is generally the bedrock of the real estate market – value-add and opportunistic investors rely on core investors for their future exit. Many core investors continue to struggle to hit internal hurdle rates (the minimum acceptable rate of return on an investment) given elevated interest rates and stubborn prime yields. This is linked to the slow return of institutional and cross-border investors, who typically transact in larger deal sizes and are more active at the core end of the market.

Private investors and end-users remain prominent in global markets, accounting for a combined 52% of total investment year-to-date, up from a pre-Covid-19 average of 35%. Private investors can often be more discretionary in deploying capital. They are less encumbered by debt financing and follow a more holistic strategy that can include other objectives beyond securing a good risk-adjusted financial return, such as wealth preservation.

End-users, meanwhile, are opportunistically buying occupied buildings to take advantage of rebased values and hedging against continued rental growth. Both buyer types are expected to remain active, but a rebound in institutional investor activity is needed to support a more sustained recovery in liquidity.

In many cases, institutions are willing and able. This is reflected in the sentiment data. But they lack opportunities to deploy capital. A defining characteristic of this downcycle so far has been the lack of distress, despite a generational increase in interest rates and a significant ‘wall of refinancing’. With little motivation to sell, landlords have been incentivised by strong occupational dynamics to retain assets and wait for better times. This is reflected in the fundraising data, where reduced fund redemptions are limiting the capital available for major institutional investors to reinvest.

Failing to meet expectations

In summary, global real estate capital markets have not performed as expected in the first half of 2025. They have been weighed down by elevated interest rates and increased volatility in the macroeconomic and political environment. Our forecasts still assume a pick-up in activity over the remainder of 2025 and into 2026. Most major markets continue to show good potential for growth, and we look forward to a more encouraging second half of the year.