Source: BIS, as of December 2025.

Meanwhile, global economic growth is expected to remain relatively stable (Figure 2) as consumption, fiscal spending, and the global infrastructure build-out appear poised to continue into 2026.

Source: Bloomberg, as of October 28, 2025. The above is based upon subjective estimates and assumptions about circumstances and events that may not yet have taken place and may never do so.

In fact, this infrastructure build-out is turning out to be a material driver of growth around the world. Cumulative global spending is on track to exceed $106 trillion by 2040 (Figure 3), with material investment across Asia due to rapid urbanization and industrialization. Meanwhile, the Americas and Europe are putting trillions into modernizing legacy systems, expanding digital infrastructure, and scaling renewable energy. Globally, we see private capital playing a central role as dedicated infrastructure fund AUM has tripled since 2016 to more than $1.5 trillion.

Note: Figures do not sum, because of rounding. Source: Food and Agriculture Organization; Global Infrastructure Hub; International Energy Agency; International Monetary Fund; Organisation for Economic Co-operation and Development; Preqin; United Nations; World Bank; World Economic Forum; McKinsey. September 2025

While the confluence of these factors appears to create a relatively “goldilocks” macroeconomic environment for investors, key risks remain top of mind in the coming year:

• Inflation could surprise to the upside, shifting the monetary policy stance more hawkish as we have already started seeing in Australia.
• The U.S. labor market could deteriorate meaningfully through large-scale layoffs rather than continuing to remain somewhat stalled.
• Geopolitical risks remain in play globally as nationalist policies, deficit spending, political uncertainty, and geopolitical conflicts continue.
• Fading confidence in the promise of AI, the growth associated with the build-out of required infrastructure, or its resulting productivity could simultaneously hamper economic growth and cause a sharp correction in equity markets, threatening the wealth effect that is fueling consumption across the higher-end consumer.

Real Estate Cycle

In the context of this macroeconomic backdrop, the real estate industry is at the threshold of a new cycle — one defined by stabilizing interest rates, rising transaction volumes, slowing new supply, and opportunities for accretive capital deployment.

While policy rates are a focus for markets, as real estate investors we remain focused on the long-end of the yield curve. Though the 10-year government bond yield is resetting structurally higher, it has remained relatively range-bound (Figure 4). We anticipate peak interest rate uncertainty is behind us, providing clarity for real estate capital markets around the world that have started to recover. Global transaction volume reached $213 billion in Q3 2025, up 21% year-over-year, with the living sector leading, office rebounding on large deals, industrial moderating on trade concerns, and retail continuing its recovery (Figure 5). Importantly, bid-ask spreads are gradually narrowing as sellers adjust expectations and buyers demand higher returns.

Source: Bloomberg, as of October 28, 2025.

Source: JLL Research, as of November 2025. Transactions US$5.0+ million, excluding land/development and entity-level deals.

In addition to higher financing costs, real estate construction costs have surged due to years of elevated labor and materials inflation. Together, these dynamics have dramatically reduced the economic viability of new development across most global property types, resulting in decreased supply (Figure 6). This supply contraction is creating tailwinds for existing assets as fundamentals begin to improve.

Source: JLL Research, 2024. North America = U.S., Canada; Retail = under construction vs previous under construction peak; Europe Living = Germany, U.K. Build-to-Rent; U.S. Living = Multihousing; Europe / Asia Pacific Retail = Shopping Centers; U.S. Retail = total retail

The recovery of the capital markets combined with decreasing supply creates the environment for a strong vintage opportunity, similar to the opportunity during the last resetting real estate business cycle post-GFC. As a result, the asset class is back on the menu for capital allocators.

Global real estate fundraising surpassed $164 billion through the first three quarters of 2025—almost matching 2024’s total—with outsized momentum in opportunistic and value-add strategies (Figure 7). While multifamily remains the most popular property type across capital flows, data centers have demonstrated material momentum in fundraising this year, capturing 31% of new capital commitments, more than double their average share in 2020–2024. In fact, investors seeking to capitalize on the digital infrastructure build-out is driving the convergence of real estate and infrastructure into the broader category of real assets for many capital allocators given both asset classes provide diversification, income stability, and inflation protection for portfolios. Though capital is coming back to the asset class, investor preferences are shifting. After facing liquidity constraints in supposedly “liquid” vehicles, allocators increasingly prefer structures that offer greater agency in capital deployment.

Source: PERE Fundraising Report, as of September 30, 2025.