The global real estate sector is poised for a rebound in dealmaking in 2025 following a period of volatility, but the recovery will be shaped by investors shifting towards alternative assets and tempered by significant global political uncertainties, according to a new report from consulting firm PwC.
While brokers express cautious optimism about stabilizing market conditions, the report warns that major elections and potential U.S. policy changes on trade, immigration, and taxation could weigh on activity. PwC noted that the imposition of significant tariffs could create a higher inflation environment, potentially impacting central bank interest rate policies and investor confidence.
A Strategic Pivot to Alternative Assets
The 2025 forecast highlights a significant strategic pivot by investors. While traditional real estate categories will continue to attract capital, the report states that the risk-weighted returns of alternative classes appear more attractive. Two key areas of growth are identified: wellness-related real estate and infrastructure.
Demand for senior living properties, from nursing homes to independent living communities, is rising dramatically in response to a rapidly aging global population. Citing United Nations figures, PwC projects the number of people over 80 will triple by 2050, yet the supply of suitable housing is not keeping pace. To address this, investors are introducing innovative models, such as converting commercial properties into mixed-use complexes with age-specific housing.
Furthermore, the boom in artificial intelligence is spurring massive investment in the infrastructure required to support it, including data centers, digital networks, and power generation facilities. This has made infrastructure an especially attractive asset class.
Evolving Financial Landscape and 2024 Recap
The report also points to an evolution in financing, with the insurance sector emerging as a key alternative source of capital as some traditional lenders pull back.
This optimistic outlook for 2025 follows a challenging period. According to PwC, global real estate M&A deal value in the first nine months of 2024 fell 13 percent compared to the previous year, though signs of stabilization emerged in the third quarter after hitting a decade-low early in the year. The trend varied regionally, with Europe, the Middle East, and Africa seeing a slight increase in deal value, while the Americas saw a small drop and the Asia-Pacific region experienced a sharp 24 percent decline.
Overall, PwC expects improved economic conditions and greater capital availability to drive an increase in M&A activity in 2025, provided that global trade tensions and other uncertainties do not derail the recovery.
Source: Cyprus Mail