Active Capital 2025: Noise, nuance and opportunity
Start of year momentum in cross-border real estate investment has met with geopolitical uncertainty and diverging regional dynamics. In this environment, understanding market, sector and asset-level nuances is more critical than ever to identify opportunities. Early indicators suggest renewing appetite for core strategies.
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The start of 2025 showed promising momentum in global cross-border capital with Q1 2025 global flows +6% YoY according to MSCI RCA. A flurry of financial market volatility, underpinned by geopolitical uncertainty, has since flattened some of this hubris, with investors taking stock, but also the potential re-routing of capital flows, especially to those traditionally more liquid, safe haven commercial real estate markets. With the second quarter only just complete, we will need to wait a couple of weeks to see whether any softening in volumes is simply down to a lag in the data, or a reflection of realit
Leaning into uncertainty
The ’difference’ this time, is that compared to some of the shocks we have seen in previous years, the underlying uncertainty is unlikely to resolve in the short term, making a ‘wait-it-out’ strategy trickier. More active investors are leaning into the opportunities from softening rates, a period of repricing and evidence of an early upswing in many global commercial real estate markets. Sensitivity and scenario analysis will be more important than ever before. It really is about noise, nuance and opportunity.
The nuance is illustrated by the variation in cross-border investment activity across, and within, regions in the first quarter. There was a sharp increase in momentum into Asia Pacific, while EMEA recorded the largest overall inbound volumes.
Capital forecasts and future flows
Looking to our forecasts for the year ahead, overall global volumes could be similar to last year, potentially with increased deployment from sovereign wealth funds (who have historically been more active at this point in the cycle) reflected by an expected uptick in outbound capital from the Middle East. We still expect the US to remain the largest global source of capital this year, albeit potentially at a slower outbound pace than in 2024, providing a further window of opportunity for other investors.
Sector appetite: resilience and repositioning
In terms of sectors, those with structural tailwinds, i.e. beds and sheds are still finding favour albeit again with nuance across markets. Those sectors which benefit from innovation and the increases in defence spending are also likely to see continued / increased interest. In several locations we are also starting to see an increase in appetite in the office sector, very much for well-located offices with the right attributes and / or good bones to be refurbished or repurposed.
Return of core?
Private capital has been an important source of demand for some time, but as some sectors have seen repricing and as debt costs moderate, especially in those locations with an innovative mix of bank and non-bank lenders, this is also supportive of broadening liquidity.
One of the more positive signals so far this year is from Preqin, who found that the number of 2025 vintage core funds globally is already more than 80% of the total 2024 vintage, an early leading indicator of appetite for core.
Key trends year-to-date
Based on RCA data, global cross-border activity across all sectors was up 6% year-on-year in Q1 2025 ($35bn). Regional variation remains significant:
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- EMEA recorded $19bn of inbound activity (+3% YoY)
- APAC saw $11bn of inbound activity (+24% YoY)
- Americas registered $5bn of inbound activity (–12% YoY)
The top five destinations for global cross-border capital YTD are the UK, US, Germany, Japan and Australia.