Real Estate Investment Outlook: Poised for recovery, but facing headwinds
A nascent recovery across global real estate could be stalled by ongoing geopolitical volatility and knock-on effects for inflation and growth, but our proprietary valuation framework continues to point to a potentially attractive sequence of vintages in which to invest.
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We are pleased to share our H1 2026 Investment Outlook, which provides a summary of our proprietary relative value framework that informs our assessment of how investors should be seeking to position their real estate portfolios for medium-term to long-term outperformance.
The bi-annual outlook also provides the Schroders Capital team’s views on preferred strategies playing to the most impactful macro themes, as well as the key opportunities we see within these preferred strategies.
Key takeaways
In the last edition of our investment outlook, we shared our view that the early stages of a steady recovery in global real estate markets is progressing – and the data suggests this remains the case.
However, given disruption from the ongoing conflict in the Middle East, the nascent recovery and positive momentum in transaction volumes, fundraising and value movements in 2025 and early 2026 is at risk of stalling.
Investors are naturally likely to pause and reflect upon planned investment and allocations for 2026. Real estate may be a beneficiary of capital seeking perceived ‘safe haven’ exposures with cashflow resilience and inflation hedging potential, although it is too early to tell if this is a dynamic will manifest.
However, we maintain the view that the global real estate market has reached an inflection point following significant repricing between 2022 and 2024 – and that a broad-based recovery will ultimately materialise.
Our proprietary valuation framework indicates a growing share of attractively priced opportunities across multiple sectors and regions. As such, we continue to believe that we are in the midst of a compelling sequence of investment vintages to deploy into the asset class.
Our economic outlook remains muted, and we had already been underwriting below consensus economic growth and persistently higher inflation.
Real estate income levels remain well supported by constrained supply levels and elevated construction costs caused by supply chain disruption, alongside higher debt costs. We see increasing evidence of a “cost-push” impact on rents.
Should economies regain momentum, these dynamics could allow well-positioned assets to deliver real income growth. Tight supply conditions and growing construction costs, coupled with rebased valuations, are therefore laying the foundation for potentially improved long-term performance.
We are particularly drawn to sectors where there is needs-based resilience and operational improvement can unlock alpha – such as urban logistics, and both living and storage formats. Overall, the market backdrop suggests that disciplined deployment should benefit from favourable entry points and rising cash-on-cash yields.
Our preferred portfolio positioning remains relatively neutral across sectors owing to greater visibility on ‘rental floors’ within the retail and office sectors. We expect asset and location considerations to have a greater influence on relative performance.
The current environment is further accelerating the recapitalisation and secondaries opportunity set across real estate platforms, companies and other holding entities. These involve providing capital solutions to established management teams facing time or capital constraints in optimising value.
- Opportunities are being fuelled by favourable cyclical and structural dynamics – particularly the need to address operational complexity and sustainability requirements, to drive outperformance through income growth.
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