Investment Trends in Commercial Real Estate for H2 2025
As we continue into the second half of 2025, the global Commercial Real Estate (CRE) landscape is shifting in response to earlier market volatility, rising interest rates, and climate-driven insurance costs. Investors are moving away from saturated core markets, where high interest rates and property taxes have made ownership more expensive, and where remote and hybrid work have weakened demand for traditional office space. Instead, capital is flowing into tier-2 and tier-3 cities, as well as into alternative property types, such as data centers, multifamily housing, and student housing, which Deloitte projects could make up nearly 70% of U.S. CRE. These trends reflect a broader strategy of diversification, resilience, and long-term value rather than a complete departure from core assets.
This article explores the key CRE investment trends defining the second half of 2025 across WTCA’s five global regions: Asia Pacific, Europe, Latin America, the Middle East and Africa, and North America.
ESG and Resilience Continue to Guide Investment Strategy
As highlighted in the April issue of Meridian’s feature article on the importance of integrating ESG principles in business, environmental and governance considerations are now central to global investment decision-making. For the second half of 2025, the demand for resilient, sustainable assets will help mitigate climate-related risks and enhance long-term value for investors.
While ESG remains a global priority, its implementation varies by region. In some markets, integration is fueled by tenant expectations and reputational considerations. In other regions, sustainability is being encouraged through financial incentives, such as through green interest rates in Europe and climate-linked performance contracts in the U.S.
Capital Reallocation Accelerates
Through the second half of 2025, capital appears to be moving more cautiously, but also more strategically, as investors adopt a “wait-and-see” attitude amid ongoing economic policy uncertainty. Shifting interest rates, inflation concerns, and evolving monetary policies have prompted many to pause and reassess. Still, investors are ready to act on new opportunities following a wave of market corrections and slower deal volumes from the start of 2025.
A defining feature of this cycle is the movement of capital beyond the U.S. While the U.S. has traditionally dominated global real estate investment, the result of trade uncertainty is prompting many investors to look elsewhere. Capital is flowing to markets in other regions, including Japan, India, and parts of the Middle East, due to their exhibited strength in growth potential and their rising demand fueled by growing populations and technological initiatives.
Regional Highlights: Where Opportunity is Emerging
Asia Pacific
Rapid urbanization is fueling real estate growth across mid-sized and secondary cities in the region. According to PWC’s Investor Outlook for the first half of 2025, around 40% of investors ranked India as the most attractive emerging market. This rising interest reflects how investors are drawn to India’s regulatory landscape and growing participation from Japanese firms eager to tap into the country’s robust growth prospects. In Indonesia and Vietnam, infrastructure investment and a growing middle class are driving residential and industrial park development beyond capital cities.
Japan remains a magnet for international capital, with tier-1 cities, like Tokyo and Osaka, attracting steady interest in the multifamily sector. At the same time, digital transformation is accelerating the demand for data infrastructure. Secondary hubs, such as those in Osaka and Kuala Lumpur, are emerging as key locations for hyperscale campuses and multi-tenant data centers, thus offering long-term value amid the surging demand for AI and cloud-based services.
Europe
Commercial real estate investment in Europe is gaining momentum, with Cushman & Wakefield forecasting an 8% increase in Portugal for 2025, driven by macroeconomic stability and falling interest rates. Although the retail sector led in 2024, alternative assets like student housing are on the rise for the rest of 2025. It appears that foreign capital, primarily from France and Spain, continues to be the dominant force, accounting for over 70% of total investments. The U.K. market, particularly London’s West End, is attracting renewed interest following price adjustments tied to fiscal policy shifts. Across Europe, data centers are emerging as a key growth sector, fueled by AI adoption and rising data demand. Cities like Paris, Frankfurt, and Madrid are seeing increased investor activity, with Spain offering attractive cap rates up to 9%.
Latin America
Investment is targeting the development of mixed-use properties in high-growth urban zones, especially in Colombia, Mexico, and Chile. Specifically, developers are incorporating retail, residential, and office spaces into a single building or complex. This trend is driven by the desire for convenience and the need for efficient use of space in urban areas. Hospitality and affordable housing remain two of the fastest-growing segments in the region. The tourism sector also continues to rebound, especially in destinations like CancĂşn, Cartagena, and Santiago, where international travel and domestic leisure demand are supporting hotel and resort development.
At the same time, increasing urbanization and housing shortages are creating opportunities for scalable, institutional-grade affordable housing projects. As infrastructure improves and political stability strengthens in select markets, tier-2 cities are becoming viable long-term development opportunities in this region.
Middle East & Africa
Urban transformation projects across the Gulf Cooperation Council (GCC) are elevating secondary cities into key development hubs. For example, Saudi Arabia’s urban population is projected to rise to 90% by 2030, up from 83% in 2023, reaching a total population of 38.5 million. Governments are making significant investments in infrastructure, housing, and logistics in cities such as Sharjah, Dammam, and Abu Dhabi’s outer zones to support this growth. Smart-city initiatives in the UAE are leveraging advanced technologies to improve urban living and sustainability.
According to CBRE’s recent Africa report, real estate interest is rising in cities like Kigali, Nairobi and Accra, driven by the growth of young populations and expanding digital connectivity. Morocco is also positioning itself as a strategic gateway for AI investment, benefiting from abundant solar energy resources and proximity to Europe. Meanwhile, South Africa and Kenya are emerging as regional hubs for AI development. Several African nations are also investing in training AI models in local languages, advancing digital inclusion, and building long-term innovation capacity.
Together, we see how these trends are creating new opportunities for investors by reshaping global supply chains and trade routes, and positioning key urban centers as strategic hubs in a dynamic geopolitical and economic landscape.
North America
Tier-2 cities across the U.S. Sun Belt, such as Dallas, Nashville and Tampa, are gaining attention as high-potential investment hubs. These markets offer strong fundamentals, including robust job growth, population influx, and more affordable housing relative to coastal metros. Multifamily housing remains a key sector, as demand continues to outpace supply. Inward migration, corporate relocations, and a lower cost of living are driving both tenant interest and institutional capital into these growing urban centers.
Outdated office properties in high-profile cities face rising vacancies. In response, investors are turning toward resilient, demographically aligned sectors such as student housing, senior living, life sciences, logistics, and data centers. These alternatives are especially attractive in secondary markets with flexible zoning and supportive local policies. As a generational shift unfolds with 60% of senior CRE leaders expecting to retire within the next decade, next-generation investors are accelerating the move toward more adaptive, sustainable, and high-growth asset strategies. In the U.S., alternatives already comprise over 40% of commercial real estate value, signaling a long-term structural shift in investment focus.
Looking Ahead: Strategic Considerations for Investors
As the rest of 2025 unfolds, real estate investors face a complex mix of unpredictability and opportunity. Real estate success will depend more on choosing the right location, focusing on high-growth sectors, and investing in sustainable, future-ready projects than it will on owning traditional property types. As capital is reallocated across regions, it is clear that next-generation leaders will be reshaping the market around adaptability, demographic shifts, and technological advancements.