Real Estate Outlook H1 2026: Three takeaways for private investors
A nascent recovery may stall in the face of geopolitical headwinds and knock-on effects for inflation and growth, but we still structurally supportive fundamentals and attractive long-term opportunities.
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Schroders Capital’s real estate team recently published its H1 2026 investment outlook, looking at the latest macro and market trends – and how investors should position their portfolios for the medium to long term. In this article, we examine the key takeaways for wealth managers and private investors.
Global real estate entered 2026 with improving momentum. Transaction activity, fundraising and valuations all showed signs of recovery following the significant repricing that reshaped the asset class between 2022 and 2024.
However, the investment backdrop has become more complex. Renewed conflict in the Middle East has increased uncertainty around inflation, energy prices and economic growth, raising the possibility of the nascent recovery stalling – and that investors may delay planned allocations in the near term.
Despite these challenges, we believe the global real estate market remains at an important inflection point. Valuations have largely reset, structural support related to constrained supply remains – and our proprietary framework continues to identify attractively priced opportunities across sectors and regions, albeit evolving unevenly and sequentially.
1. Recovery persists – but facing headwinds
After several years of subdued activity, there have been growing signs that investors are regaining confidence in real estate markets.
Transaction volumes continued to improve through 2025 and into early 2026, although the recovery remained gradual. Specifically, while Q1 2026 saw higher deal volume than any of the corresponding quarters since 2023, it was still only on par with the 10-year Q1 average.
Real estate investment volumes improved in 2025 and Q1 2026
Source: MSCI RCA, Schroders Capital, May 2026 *Volumes excl. sales of development land
Transaction pricing, too, has been gradually improving – although, again, the modest appreciation seen marks more of a stabilisation than a surge.
Real estate transaction pricing has stabilised in recent quarters
Sources: Green Street Advisors, Schroders Capital. May 2026. Data last updated on the 19th of May 2026. *Core sectors is an unweighted average of the office, industrial, multifamily and retail sectors.
However, given disruption from the ongoing conflict in the Middle East, the nascent recovery and positive momentum in transaction volumes, fundraising and value movements is at risk of stalling.
Investors are naturally likely to pause and reflect upon planned investment and allocations for 2026. On the other hand, 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.
It is also important to note that, while the headwinds facing the sector are significant, the backdrop to this latest crisis are very different from 2022. Then, the invasion of Ukraine triggered rapid monetary tightening, because energy shock coincided with pandemic-related supply bottleneck, ‘tight’ labour markets and a demand surge following the end of lockdowns.
This time around goods flow remains resilient despite selective pressures, labour markets are generally softer, and consumers and businesses are less shielded from the impact of higher energy prices. These are all factors that central banks are watching closely – and we do not expect a sharp hawkish turn, at least in the short term.
2. Supply constraints creating foundations for long-term growth
One of the most supportive features of today's real estate market is the lack of new supply.
Across many sectors and regions, elevated construction costs, which have been exacerbated by the conflict in the Middle East, coupled with higher financing expenses has significantly reduced development activity. As a result, the pipeline of new space is shrinking at a time when occupiers continue to prioritise modern, high-quality buildings.
This dynamic is becoming increasingly visible across office, logistics and residential markets, where supply growth is expected to remain well below historical averages over the coming years.
Construction pipelines continue to decline: European industrials and office sectors
Source: PMA, Green Street Advisors, Schroders Capital, May 2026. The views shared are those of Schroders Capital and are subject to change. These views should not be interpreted as investment guidance or a guarantee of any investment outcomes. Shown for illustrative purposes only. There is no guarantee forecasts will be realised, or lead to favourable investment opportunities.
The slowdown in development activity is important because real estate performance is ultimately driven by the balance between supply and demand. When fewer new buildings are delivered, existing assets face less competition for tenants, helping to support occupancy and rental growth.
Moreover, higher construction costs are creating what we describe as a "cost-push" effect on rents. As replacement costs rise, developers require higher rents to make new projects financially viable. This can benefit owners of existing assets, particularly those offering modern, sustainable space that would be expensive to replicate today.
Renewed rise in construction costs to feed through to rental growth
Source: Federal Reserve, Green Street Advisors. April 2026 . *Data is based on producer prices. The views shared are those of Schroders Capital and are subject to change. These views should not be interpreted as investment guidance or a guarantee of any investment outcomes. Shown for illustrative purposes only.
While economic growth may remain subdued, supply-side conditions are becoming increasingly supportive for real estate, especially in the context of rental growth for well located, future-proof properties. For investors, this suggests income growth could become a more important driver of returns during the next phase of the market cycle.
3. Secular trends benefitting from structural tailwinds
While market cycles can influence short-term performance, long-term returns are often shaped by powerful structural trends that transform how people live, work and consume.
Many of the themes that have supported real estate over the past decade remain firmly in place. However, the combination of changing occupier preferences, demographic shifts, technological innovation and sustainability requirements is creating an increasingly differentiated opportunity set for investors, supported by specific secular trends.
For example, we continue to see particular appeal in sectors supported by needs-based demand and resilient cashflows. Urban logistics and storage formats are especially well positioned, in our view, given their combination of favourable structural trends, constrained supply and opportunities for operational improvement – and these markets have strong growth potential in Europe especially, given the reduced penetration compared to the US.
Warehousing and storage market growth potential outside of US
Source: Schroders Capital, February 2026. CBRE, Colliers, Cushman & Wakefield, Fedessa, Green Street Advisors, JLL, Savills, Self-Storage Association UK.
As the recovery in real estate broadens, these characteristics may help support long-term income growth and attractive risk-adjusted return
Elsewhere, demographic shifts related to ageing populations and changing household formation patterns are influencing demand for a variety of residential formats – and multifamily housing, single-family rental, student accommodation and senior housing continue to benefit.
Senior housing: Ageing populations will demand more purpose-built housing provision
Sources: OECD, Oxford Economics, UN, Schroders Capital, as of May 2026. The views/opinions stated are those of the Schroders Capital Real Estate team and are subject to change. The views expressed should not be interpreted as investment guidance. *Belgium, Finland, France, Germany, Italy, Netherlands, Spain, Sweden, Switzerland & UK.
Many of these sectors share common characteristics: they benefit from long-term demand drivers, face relatively favourable supply conditions and often require specialist management expertise. As a result, they can provide attractive diversification benefits while helping investors access sources of return that may be less dependent on broader market cycles.
How can private investors access real estate today?
Today, multiple structures, including open-ended evergreen funds, make private assets more accessible to individual investors. Combined with the current opportunity we see in the asset class, this offers private investors an exciting entry point to access the potential benefits of real estate as a source of attractive, long-term and income-based returns.
As with all private investments, performance is subject to investor expertise. We believe manager proximity to the underlying assets, both geographically and operationally, is vital. And of course, for all individual investors seeking to access commercial real estate, the liquidity profile and governance provisions of the growing number of investment solutions available must be factored into portfolio construction.
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