HOUSTON–2025 has the potential to be a pivotal turning point for global real estate markets, according to leading global real estate investment manager Hines’ 2025 Global Investment Outlook report.
The report, titled “A New Dawn: Seizing Real Estate’s Moment of Opportunity,” highlights the key trends and sector-specific strategies Hines sees shaping the global real estate market as it transitions into a new cycle of growth and recovery, with a specific focus on the potential opportunities unfolding in the private markets.
“As we enter 2025, we remain in the midst of a massive transition in the investment landscape,” said David Steinbach, Global Chief Investment Officer of Hines. “The dynamics of the previous cycle–where unusually low interest rates propelled growth and easy leverage–have faded and are being replaced by a higher-for-longer interest rate environment where investors will need to focus on alpha generation. We will likely look back on 2025 as a pivotal moment of recovery in many areas of the commercial real estate sector–now is the time for investors to put capital to work and reposition their portfolios.”
Priority Sectors and High-Conviction Themes
- Living: Addressing acute housing shortages and shifting demographics, the living sector offers significant opportunities as households increasingly favor renting over buying in developed markets. This trend aligns with a global affordability crisis driven by widespread housing shortages and rising mortgage rates. In fact, the global housing shortage is estimated at roughly 6.5 million units1, further solidifying renting as a preferred option in many regions.
- Retail: Following years of transformation, the retail sector is set for continued growth. Across the four major property types in NCREIF, the retail sector has ranked first in total returns in the U.S. for each of the past eight quarters through Q3 2024. Strong consumer sentiment and robust wage growth underline the compelling thesis for open-air, grocery-anchored retail formats especially.
- Industrial: Despite some moderation in fundamentals, embedded net operating income (NOI) growth in the industrial sector positions it for renewed momentum as supply and demand stabilize. Within commercial real estate, the industrial sector was arguably the largest benefactor of the pandemic due to the rise of online shopping, inventory control, supply chain reconfiguration, and industrial policy.
- Office/Debt and Alternatives: Return-to-work trends and opportunities in niche sectors, such as student housing and digital infrastructure, present favorable prospects for tactical investments. On average, fundamentals are no longer weakening in most U.S. markets, and our gauge of fundamentals health has increased modestly over the last couple of quarters on positive net absorption for the first in a couple of years.
1 Sources: Oxford Economics, Eurostat, U.S. Census Bureau, Statistics Canada, Statistics Korea, Australian Bureau of Statistics, Hong Kong Census and Statistics Department, Statistical Bureau of Japan, and Hines Research. As of 2Q 2024.
Global Markets Takeaways
According to Hines’ analysis, as of the third quarter of 2024, just over 66% of global markets were in some phase of the Buy cycle, the highest level since 2016.
- North America: Over 60% of North American markets are in one of the first three Buy phases. Nearly 19% of markets are in the Late Buy phase, characterized by fair valuations coupled with strong fundamental momentum. Opportunities abound in industrial assets, particularly those with short-term lease rollovers, allowing NOI growth. The living sector, marked by increasing demand for single-family rentals, presents significant opportunity, particularly in the U.S. Midwest and Northeast, where fundamentals remain strong.
- Europe: Europe stands out with 75% of its markets in the Early Buy, Buy, or Strong Buy phases, the highest globally. Industrial markets continue to show strong fundamentals, while prime office rents are rising in key cities such as London, Paris, and Amsterdam, driven by limited new supply and high demand for energy-efficient spaces. Retail investments in Europe remain attractive, particularly in cities with strong local spending and high tourism. The region’s retail markets, less saturated than their U.S. counterparts, are recovering more rapidly.
- Asia: Asia remains diverse, with opportunities concentrated in Japan, South Korea, and Australia. Japan’s office market appears to have reached a bottom and is beginning to show signs of an upswing, while its residential sector continues to experience rent growth driven by inflation and improved fundamentals. In South Korea, Seoul stands out as arguably one of the healthiest office markets globally, with low single-digit vacancy rates and strong rent growth. Meanwhile, Australia’s for-rent housing market, still in its early stages of institutionalization, mirrors the U.S. market from decades ago. Demand for retail assets is rebounding in the region, driven by a resurgence in tourism.
“As we close the door on 2024 and look ahead to 2025, our data finds that the global real estate market presents a promising, but complex, landscape,” said Joshua Scoville, Head of Global Research at Hines. “It’s our conviction that the year ahead will bring stability, clarity, and potential opportunity for global real estate investors as the dust settles and the asset class turns a corner into recovery.”
Hines’ “A New Dawn: Seizing Real Estate’s Moment of Opportunity,” 2025 Global Investment Outlook is available for download on the Hines website.
