Real estate is at an inflection point: winners and losers – and the next sequential opportunity
As markets move from correction to early recovery, dispersion is widening – and that is creating one of the most attractive, yet highly selective, entry points in years.
Profily autorov
Global real estate is emerging from one of the most significant valuation resets in more than a decade. Following two years of adjustment that found a floor in mid-2024, and amid broader market volatility, the asset class has gradually shifted from broad-based correction to the early stages of recovery.
But while the direction of travel is clear, it is equally true that the transition is uneven and the dispersion of outcomes is widening.
As such, this is a critical moment for wealth managers: rebased entry points, improving fundamentals and a growing set of capital-driven opportunities make a strong case for considering real estate allocations for clients, but selectivity and understanding the sequential nature of the opportunity is key.
Uneven correction – and recovery
Global real estate values have rebased by 15-20% since mid-2022, although the depth and speed of repricing have varied markedly by sector and geography. Residential and industrial assets corrected earlier and more modestly, supported by resilient demand and constrained supply.
Offices, by contrast, have experienced a deeper and more protracted adjustment as occupier preferences, financing conditions and sustainability requirements have shifted – falling by more than 30% since 2022. In several markets, assets that repriced swiftly, or avoided excessive leverage, are now showing early signs of stabilisation.
Significant divergence in pace and depth of repricing
Source: MSCI, Green Street Advisors, Schroders Capital, June 2025. Past Performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. Exchange rate changes may cause the value of any overseas investments to rise or fall.
In recent quarters, a handful of market-sector pairs have begun to recover – with capital values improving. Undoubtedly – and similarly – the current recovery is not a synchronised rebound, with sectors and segments rebounding at different rates and sequentially.
This means that investors face a fundamental turning point defined by widening performance gaps between sectors. In this environment, capital must be deployed patiently, with an emphasis on relative value rather than a broader market exposure.
Structural demand drivers remain intact
Despite ongoing cyclical uncertainty, the long‑term forces underpinning real estate demand remain broadly supportive. Demographic change, evolving consumer behaviour, technological adoption and the global energy transition continue to reshape occupier requirements across sectors.
For example, urbanisation and household formation are sustaining demand for residential assets, particularly in markets where affordability constraints and supply shortages persist. Meanwhile, the reconfiguration of supply chains for resilience and the continued rise of e‑commerce are supporting logistics and industrial assets.
Meanwhile, the energy transition is driving demand for modern, energy‑efficient buildings capable of supporting electrification, data processing and renewable integration
Together, these trends are reinforcing a widening divide between modern, sustainable Grade‑A assets and older, increasingly obsolete stock. What was once framed as a cyclical ‘flight to quality’ increasingly looks structural, as tenants show a growing willingness to pay for buildings that meet tightening regulatory, environmental and operational standards.
For investors, real income growth remains achievable, but only where these tailwinds align with assets fit for purpose in a changing market.
Supply constraints are strengthening the outlook
While demand fundamentals remain resilient, supply-side constraints are becoming a further, powerful driver of performance. Elevated construction costs, tighter lending conditions and reduced development pipelines are limiting the delivery of new assets across most major markets. In many regions, new construction activity has fallen to multi‑year lows.
This structural undersupply is already influencing rental dynamics. Rising construction costs are creating a “cost‑push” effect, where rents must increase to maintain development viability. In markets where demand is stable or improving, this is translating into tangible rental growth, particularly for high‑quality assets.
In Europe, construction costs have risen roughly a quarter faster than rental growth since 2022, creating a clear viability gap for new development.
Constrained new supply is supporting rental growth
Source: JLL, CBRE, Eurostat, and Schroders Capital. January 2026. 27 markets in Europe. Shown for illustrative only and should not be interpreted as investment guidance.
Should economic momentum strengthen over the coming years, these supply constraints could amplify income growth further. For existing assets, especially those aligned with modern occupier requirements, the combination of rebased valuations and tightening supply is laying the foundation for compelling prospective returns.
New opportunities
The repricing of real estate has not been driven solely by fundamentals. Capital market conditions, higher interest rates, reduced liquidity and shifting lender behaviour have created dislocations that are now generating a diverse set of opportunities.
Across global markets, established management teams and asset owners are facing time or capital constraints. Some require liquidity to refinance debt, reposition assets or meet investor redemption needs. Others are navigating funding gaps created by higher borrowing costs or the need to invest in sustainability upgrades.
Across UK loan vintages maturing through 2027, refinancing gaps now absorb 30–50% of the capital stack, signalling a tightening squeeze on borrowers’ liquidity. For UK loans originated after 2021, all‑in financing costs at maturity have surged to nearly double their initial levels, sharply eroding debt‑service capacity.
These pressures are creating opportunities for investors able to provide flexible capital solutions across both debt and equity structures. Which are providing for increasingly attractive entry points, often with enhanced downside protection and strong return potential.
To illustrate, the ‘gap funding’ opportunities that are emerging, a UK market estimate is provided for loans maturing at the end of 2026. Given the valuation falls experienced and modest subsequent expected recovery, existing investors in levered structures will need to find additional liquidity to financially stabilise their positions.
Increasing volume of recapitalisation opportunities emerging
Source: Bayes Business School, MSCI, Refinitiv, Schroders Capital, November 2025. *Estimated by assuming a newly originated loan at average LTV according to Bayes Business School survey data and both the past and projected MSCI UK all property capital growth, to infer the implied equity position at the end of a five-year term for a bullet loan. ** Assumes prevailing and forward-curve implied five-year swap rates at these times plus Bayes Business School survey data for average senior real estate debt margins and five-year amortized arrangement fees.
Bringing it all together
For wealth managers, the opportunity set extends well beyond acquiring repriced assets. The ability to participate in liquidity‑driven situations, where capital scarcity is creating favourable terms, is becoming a key differentiator in performance.
Rather than presenting a single moment of entry, the current inflection point is creating a sequenced opportunity set that spans geographies, sectors and investment structures. As different markets move through recovery at varying speeds, the coming years are likely to offer a rolling series of opportunities.
Relative value analysis highlights several geography‑sector combinations where prospective returns are now elevated. Markets that repriced early, or where fundamentals remain strong despite valuation declines, are particularly compelling. Our latest investment outlook explores these dynamics in depth and outlines where we see the most actionable opportunities emerging.
At the same time, capital market dislocation is generating situational opportunities that can deliver incremental performance for investors with the flexibility to act.
History reinforces this point. Investment vintages following periods of price correction have consistently delivered above‑average returns, but only when capital is deployed selectively and with a clear understanding of where value is emerging first.
The opportunity is not a single “buy the dip” moment. It is a phased deployment strategy that rotates capital as markets progress through recovery, allowing investors to capture value sequentially across the cycle.
A compelling entry point for the decade ahead
For wealth managers and advisers, we believe global real estate is offering one of the most attractive entry points in more than a decade. The combination of rebased valuations, structural demand tailwinds, constrained supply and capital market dislocation is creating a rare alignment of factors that can support long‑term returns.
But capturing this opportunity requires discipline. The winners of the next cycle will be those who can distinguish between structural growth and structural decline, between modern assets and obsolete stock, and between markets that are recovering and those still adjusting. At this moment of inflection, the ability to navigate dispersion, rather than rely on broad market exposure, will be critical.
By deploying capital patiently and sequentially, investors can position themselves to benefit from the next phase of the global real estate cycle. For those prepared to act with selectivity and conviction, the coming vintages may prove among the most rewarding of the decade.
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