Key Takeaways
- • Real estate pricing recovery continued modestly in Q2 2025 across US and European markets, with sector-level divergences persisting despite broader valuation growth reflecting prior public market repricing.
- • Private real estate equity fundraising has rebounded significantly year-to-date, already capturing 85% of total 2024 recorded levels, signaling renewed capital appetite despite macro uncertainties.
- • Tariff-related inflation fears have eased, though material interest rate cuts remain unlikely despite a softening economic outlook, constraining near-term capital cost relief for real estate investors.
- • Deal activity increased marginally in Q2 2025 but remained subdued overall, while rental income streams remain well-supported by constrained supply pipelines driven by elevated construction costs and macro headwinds.
- • European real estate sentiment indicators moderated over Q2 2025, with INREV sentiment declining notably on investment and liquidity concerns, partially offset by positive leasing prospects.
Summary
Schroders Capital's Q3 2025 Global Real Estate Lens report documents cautious recovery dynamics across global property markets, with transaction activity and valuation metrics showing modest improvements even as macroeconomic uncertainty persists. The report synthesizes key data on capital markets conditions, occupier markets, and private real estate debt activity to provide institutional investors with current market positioning.
Pricing momentum has returned to real estate markets following prior quarters of repricing pressure. Both US and European markets posted positive valuation movements in Q2 2025, though recovery remains measured with notable sector divergences. Private real estate valuations are broadening their gains, reflecting the repricing cycle that began in public equity markets in preceding quarters. This recovery signals market stabilization rather than aggressive capital deployment, with investors maintaining cautious positioning as macro conditions remain fluid.
The tariff environment has shifted market expectations. While fears that tariff announcements would reignite persistent inflation have eased, the market is not pricing in material further rate cuts despite recognizing a softening economic outlook. The volatility triggered by fluid tariff policy announcements since early April has only now begun appearing in private real estate transaction data, creating a lag between headline macro developments and asset-level impact.
Capital formation shows encouraging signs. Private real estate equity fundraising is recovering through 2025, having already reached 85% of full-year 2024 recorded levels. This rebound indicates institutional appetite is returning, though it remains measured relative to historical norms. Deal activity increased modestly in Q2 2025 but stayed at subdued absolute levels, suggesting investors remain selective despite improved sentiment.
Occupier fundamentals remain resilient. Rental income levels continue to benefit from tight supply conditions, with future development pipelines constrained by elevated construction costs and macro uncertainties. European real estate sentiment indicators moderated in Q2 2025 according to the INREV sentiment index, with investment and liquidity sub-indicators declining notably. However, positive leasing prospects partially offset these concerns, reflecting the underlying supply-demand dynamics supporting asset income streams in key markets.
Pricing momentum has returned to real estate markets following prior quarters of repricing pressure. Both US and European markets posted positive valuation movements in Q2 2025, though recovery remains measured with notable sector divergences. Private real estate valuations are broadening their gains, reflecting the repricing cycle that began in public equity markets in preceding quarters. This recovery signals market stabilization rather than aggressive capital deployment, with investors maintaining cautious positioning as macro conditions remain fluid.
The tariff environment has shifted market expectations. While fears that tariff announcements would reignite persistent inflation have eased, the market is not pricing in material further rate cuts despite recognizing a softening economic outlook. The volatility triggered by fluid tariff policy announcements since early April has only now begun appearing in private real estate transaction data, creating a lag between headline macro developments and asset-level impact.
Capital formation shows encouraging signs. Private real estate equity fundraising is recovering through 2025, having already reached 85% of full-year 2024 recorded levels. This rebound indicates institutional appetite is returning, though it remains measured relative to historical norms. Deal activity increased modestly in Q2 2025 but stayed at subdued absolute levels, suggesting investors remain selective despite improved sentiment.
Occupier fundamentals remain resilient. Rental income levels continue to benefit from tight supply conditions, with future development pipelines constrained by elevated construction costs and macro uncertainties. European real estate sentiment indicators moderated in Q2 2025 according to the INREV sentiment index, with investment and liquidity sub-indicators declining notably. However, positive leasing prospects partially offset these concerns, reflecting the underlying supply-demand dynamics supporting asset income streams in key markets.
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