We’re already seeing institutional capital become more active in major markets, especially for larger transactions. Over the past six months, some 43% of U.S. transactions over $100 million were awarded to institutional buyers, up from 27% in 2023.

In some of the world’s more resilient markets – most notably in the likes of the U.S., UK, Japan and South Korea – top-quality real estate is once again attracting institutional bidders.

It’s not only institutional capital that’s becoming more active. Investment activity by private wealth investors grew by nearly 190% between 2007 and 2023, yet this source of capital is currently estimated to be less than 5% allocated to real estate. We expect private wealth to remain more active in this next cycle – with allocations rising for select, often unique, opportunities in prime locations of core markets.

Investors have become increasingly demanding of higher returns in order to compete with fixed income yields. As core capital becomes more active, it will need to be more creative to compete in the asset class, in particular for more in-favor sectors.

We expect investors to have a greater focus on sector diversification as transaction markets improve, across a range of direct, indirect and M&A strategies. In underwriting, income growth and cash flow will be in focus in the short term as investors continue to balance cyclical and secular pressures. Yield compression is already evident for in-favor sectors, such as living, logistics and select alternatives. Investors’ shift toward these sectors in recent years alongside the interest in investing in operating platforms will continue.

As supply chains continue to nearshore (an ongoing trend), momentum in logistics and industrial construction is set to build, particularly in the U.S. where tenant demand will drive leasing activity for manufacturing sites. Efforts to either upgrade or replace ageing industrial buildings with more efficient spaces will also sustain the sector’s drive.

It’s increasingly clear that 2025 will be a year of both growth and complexity for our industry. We’ll see investors return to the fold as real estate lending and transactional markets further improve – and crucially, for the office sector, as more companies seek additional space. All this, hopefully, in a time of positive economic growth.