The past year underscored just how dynamic and nuanced the real estate market has become. Persistent macroeconomic uncertainty shaped investor behavior, with inflation proving stubborn, interest rates remaining elevated but range-bound, and monetary policy responding more to labor market weakness than price stability. Equity markets swung between optimism and caution, driven by geopolitical risks, currency volatility, and the rapid rise—and scrutiny—of artificial intelligence. These forces filtered unevenly through public and private real estate markets.

For listed real estate, the story was one of divergence. Industrial REITs turned a corner mid-year as leasing confidence returned, pushing valuations near or above NAV. Multifamily faced a tougher narrative: steady absorption in Sunbelt markets couldn’t offset demand concerns after a shortened spring leasing season, leaving shares at deep discounts. Retail surprised with regional malls outperforming strip centers, reflecting a decade of repositioning toward higher-income consumers. Meanwhile, data center REITs stayed disciplined, resisting the temptation to chase AI-driven exuberance even as hyperscalers deployed billions.

Private markets wrote a different chapter. Liquidity from debt providers was abundant, but higher base rates kept positive leverage elusive and a bid-ask spread remained, slowing transaction volumes. Investors shifted focus from spreadsheets to basis and operations. Preferred equity became a favored structure in multifamily, offering mid-single-digit returns with downside protection. Retail regained favor, particularly essential service retail, where tenant diversification and day-one positive leverage continue to shine.

Two themes dominated the headlines: AI and demographics. Data centers captured unprecedented capital flows, though supply remained tempered by power constraints and long lead times. Aging demographics led to continued strength for the senior housing sector, delivered standout performance in the REIT market this year, leveraging scale and operational expertise in a sector where private capital still struggles to compete.

As we turn the page, 2026 looks promising. Normalizing supply and attractive relative valuations set the stage for opportunity across listed and private markets. For investors, the takeaway is clear: lean into dispersion, prioritize operational edge, and structure for resilience.

Stay tuned for our 2026 Market Outlook series, where we’ll explore the macro trends and sector strategies shaping the next phase of the cycle.