Global commercial real estate (CRE) capital markets are operating under elevated geopolitical and policy uncertainty, with the Iran conflict contributing to renewed volatility across financial markets. While these conditions have increased sensitivity to downside risk, they have not translated into broad capital market dislocation. Instead, risk has been reflected more clearly in pricing, underwriting, and selectivity, with measures of risk premium across credit markets remaining consistent with continued market function.
This balance of heightened uncertainty and continued market function defines the past few years. Global economic policy uncertainty measures remain near cycle highs, and recent geopolitical events have reinforced how quickly volatility can re-enter markets, particularly through energy prices and inflation expectations.
Credit Markets Setting the Tone
Credit markets provide a useful reference point. Investment grade corporate bond spreads across the globe in both the U.S. and EU tightened materially through much of 2025 into early 2026, and, despite recent volatility, remain relatively healthy compared to history.
Only in the high-yield EU are we seeing any meaningful signs of spread expansion, with spreads moving out 35 basis points (bps) since the end of February, right before the Iran conflict began. U.S., Asian and emerging market spreads, which are all either entirely or predominantly investment grade, have all moved out less than 10 bps over that same time frame. These measures are more akin to CRE debt costs and provide a better benchmark for the relatively minimal additional risk premium investors will demand to lend on CRE globally.
Interest rate conditions remain a key influence on capital markets behavior. While benchmark rates have retreated from earlier highs, upside volatility has been reignited, particularly as geopolitical developments have reintroduced uncertainty around the inflation outlook and the future path of monetary policy. For real estate markets, this will likely reinforce sensitivity around exit assumptions and refinancing risk.
Global Transaction Volume Has Inflected
Transaction activity reflects cautious reengagement. Global volumes improved 9% in 2025, with aggregate volume crossing $1.4 trillion, the first time since 2022. These improvements indicate a move away from trough conditions, though activity remains roughly 25% below pre-pandemic (2017-2019) averages. These trends suggest the market is moving off the bottom, with capital returning but being deployed selectively.
The reason for the inflection is simple; CRE values have reset globally in the wake of higher interest rates, and the readjustment phase is seemingly nearing its conclusion. Cap rate expansion has slowed nearly universally, yet elevated base rates will inhibit broad-based compression. Instead, pricing dispersion has become more pronounced. Assets with durable income streams, strong tenant demand, and limited near-term capital needs are clearing more consistently, while secondary assets continue to face wider bid-ask spreads and uneven liquidity. The narrowing of the opportunistic window reflects the progression of cyclical price discovery, which starts with the highest quality assets and moves across CRE as risk appetites grow.
Capital Formation Is Growing, Prompting Global Reengagement
Fundraising activity strengthened in several parts of the globe according to Preqin, particularly in the Americas and EMEA, where fundraising was up 38% year-over-year and 47%, respectively. While the largest investment managers are garnering larger shares of total fundraising capital, LPs are also upping allocations to housing and industrial, which represented 21% and 12% of 2025 commitments, respectively.
Cross-border investment data points to tentative reengagement. Aggregate global cross-border investment volume outpaced overall global transaction volume, growing by more than 12% in 2025, the first increase since 2021, resulting in a 60 bps rise in share of global transaction activity. APAC was largely responsible for the increase; cross-border transaction volume increased 29% in APAC in 2025, reversing a decline that started in 2019. EMEA also saw cross-border volumes increase 12%, while the U.S. was largely flat over the past year. These shifts suggest that global capital is beginning to re-enter markets where pricing has adjusted and the bid-ask spread has improved. However, cross-border activity remains below historical norms and continues to be influenced by currency volatility, policy considerations, and execution risk.
“Sell America” Not Evident in Cross-Border Flows
Within this context, the United States continues to hold a central position in global allocation strategies. While cross-border acquisitions into the U.S. have lagged activity in EMEA and APAC, inbound capital has been directed primarily toward managing and stabilizing existing portfolios rather than toward widespread portfolio dispositions. Only 26% of cross-border transaction activity in the U.S. has been allocated to new acquisitions, with the majority concentrated in refinancing and recapitalization of existing assets. Market depth and liquidity continue to differentiate the U.S. relative to other regions, even as policy uncertainty and geopolitical developments complicate near-term execution. Allocation data suggests that most global investors have maintained long-term exposure targets to the U.S., while deployment has become more selective and increasingly focused on assets with clearer income visibility and exit liquidity.
Regional participation reflects this selectivity. APAC capital has begun to re-enter global markets, supported by long-term allocation frameworks, though deployment remains targeted. European capital flows are more mixed, shaped by institutional conservatism and regulatory considerations, while private and high-net-worth capital has provided incremental liquidity in certain segments where competition has thinned. Middle Eastern capital remains globally oriented, with recent developments reinforcing a preference for income visibility and flexibility. Latin American private wealth continues to view the U.S. as a core destination for diversification, consistent with historical patterns.Taken together, the data points to a capital markets environment defined by recalibration rather than resolution. Uncertainty remains elevated, and recent geopolitical developments have reinforced downside risk considerations. At the same time, credit markets remain open, global transaction activity has moved off recent lows, and cross-border activity is increasing, indicating that the cyclical momentum is building.
