• Greater economic stability as trade concerns ease. While growth remains subdued, major markets are expected to see continued economic expansion in 2025. The outlook for next year is more positive, supported by lower average interest rates and a more predictable global trading environment.

• Global real estate markets remain resilient through the third quarter. Pent-up industrial demand is building, with activity rising in several markets. Retailers continue to expand in core locations, while global office leasing in 2025 is at its highest level in six years.

• Investor sentiment is improving notably, resulting in a more competitive transactional market. Direct investment volumes growth continues to rebound and accelerated during the third quarter, signaling investors’ increased confidence in the market.

Direct investment activity reached US$213 billion in the third quarter of 2025, –an increase of 17% year-over-year. Year-to-date transaction volumes have now increased by 21% compared to 2024. The Americas posted particularly strong gains as transaction activity rose 26% in the third quarter led by the United States. EMEA investment volumes were 19% higher than last year in Q3, with the UK and Germany the two most liquid markets while Spain, Sweden and Belgium all posted robust growth. Trends were more nuanced in Asia Pacific where direct investment declined by 8% year-over-year. Activity in Japan remained strong despite the normalization of borrowing rates, with volumes rising by 16% year-over-year.

Cross-border investment has continued to recover in spite of geopolitical pressures, with third quarter growth of 7% year-over-year and year-to-date volumes 26% higher. The share of cross-border flows into each of the regions has remained relatively steady so far in 2025.

The global vacancy rate fell during the quarter, with decreasing availability of prime, central space. Groundbreakings have fallen to a new record low in the U.S. with three quarters of the remaining pipeline already pre-leased, while new construction starts are at the lowest level in over a decade in Europe. Occupiers with large requirements will need to explore options earlier as competition for the best space intensifies. 

Future trends: Focus shifting from workplace planning to implementation

Short-term: Although portfolio optimization remains a priority for many companies, higher utilization targets, reduced downsizing rates and centralization as tenants upgrade into higher-quality space are expected to support continued growth in leasing through year-end 2025 and into 2026.

Long-term: Affordability and availability will be increasingly in focus for occupiers as available new space in prime central submarkets remains limited. Companies will need to start searches earlier and maintain flexibility; renewals and extensions will account for a larger share of activity, while leasing in refurbished projects and core-adjacent submarkets is likely to increase.

Consumer sentiment has become increasingly mixed across markets, creating a multi-speed retail environment as high-income consumers drive spending growth. Retail fundamentals continue to be resilient across regions; U.S. absorption rebounded in Q3, with store openings now outpacing closures for the year. In Europe and higher-growth or tourism-oriented economies in Asia Pacific, retailer demand remains healthy for premium central space amid limited availability. 

Future trends: Stable fundamentals as expansionary demand tempered by limited supply

Short-term: Resilient market performance is likely to be sustained through 2026 as retailers continue to expand despite subdued consumer sentiment and labor markets. The impacts of trade policy on prices are expected to feed through gradually, with inflation set to rise moderately in the United States but decline elsewhere. Limited new supply will support fundamentals but hold back expansionary demand as retailers remain selective on location and quality.

Long-term: Dining, essential goods and experiential retailers are set to continue expanding. Elevated living costs following several years of high inflation are boosting demand for value, while higher-income consumers drive a greater share of spending growth. Rents are likely to remain on a gradual recovery path in most mature markets but remain below replacement costs, which will keep new construction subdued.

The living sector is on track for a strong 2025, with investment volumes on course to reach pre-Covid averages. The U.S. is leading the way with the third quarter notching the highest deal activity of the year. Volumes have also risen strongly in Europe and Asia Pacific , where strong demand for purpose-built student accommodation (PBSA) assets has been evident.

Future trends: 2025 set to be strong year for global living investment

Short-term: A strong Q3 and healthy pipeline of multifamily opportunities in the U.S and student accommodation portfolios in Europe and Asia Pacific means that living investment in 2025 should reach pre-Covid levels for the first time in over three years. Apartment construction challenges in Europe and signs of slowing rental demand in the U.S. may weigh on the sector’s growth trajectory next year.

Long-term: Continued housing shortages relative to the long-term growth in demand should see living remain the world’s largest real estate investment sector over the cycle. Many established markets will see continued emphasis on asset repositioning towards higher density operational living types such as PBSA and coliving.

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