Global real estate’s 2025 split: why Asia and Europe surged while North America lagged — and what 2026 may hold

Global property markets delivered a surprisingly strong performance in 2025 — but the gains were far from uniform. Developed Asia and much of Europe posted double-digit total returns, while North America produced only modest gains. That divergence reflected a mix of regional economics, sector composition and changing investor preferences, with meaningful consequences for renters, homeowners, pension funds and developers. Here’s a clear, journalistic explainer of what happened, why it matters, and what to watch in 2026.

The headline numbers

Across the year, Developed Asia led the pack, followed by Developed Europe; North America trailed well behind. One industry summary put Developed Asia’s total return at roughly 29.5%, Developed Europe at about 21.2%, and North America near 3.2% for 2025 — a striking gap that frames the year’s story.

How we got here: background and the post-pandemic reset

The global property cycle that began to unwind after the pandemic was substantially reshaped by central bank policy, changing occupier demand and the uneven economic recovery across regions. From 2022 into 2024, rapid interest-rate rises to control inflation dented property values and put financing under strain. In 2025, however, the trajectory diverged as rates stabilized or fell in some markets and sectoral winners (logistics, data centres, selective residential) reasserted themselves.

Regional macro differences mattered. Many Asian economies experienced relatively resilient growth in 2025 and benefited from a falling or plateauing interest-rate environment compared with earlier hikes, supporting investor confidence and higher asset valuations. CBRE’s regional outlook for Asia Pacific highlighted a “multispeed recovery” with sectors and markets within the region performing unevenly but overall benefiting from stronger fundamentals and an easing of borrowing costs.

In Europe, cheaper borrowing relative to the U.S. dollar and renewed interest from international capital helped lift prices and deal activity in many core markets, restoring positive leverage for some investors. Yet Europe’s recovery also faced political and geopolitical headwinds that made the path uneven. Reporting from MSCI and coverage of European market dynamics underscored how investor sentiment in early 2025 could be sensitive to international political developments.

North America’s weaker headline return reflected several forces: a still-high U.S. interest-rate footprint relative to earlier years, persistent questions about office demand in a hybrid work environment, and pockets of overhang in sectors where supply growth outpaced demand.

Sector mix amplified regional differences

A crucial reason for the split is that regions do not have the same sector exposures. Asia’s and Europe’s returns were boosted by strong performance in logistics, industrial and data-centre assets — sectors that benefited from e-commerce growth, supply-chain reconfiguration and surging demand for computing power tied to AI and cloud services. Large institutional managers and private funds, seeing secular demand, allocated into those subsectors, pushing valuations higher.

By contrast, North America carried more weight in property types that faced structural questions in 2025 — in particular some office markets still grappling with reduced occupancy and slower demand for central business district space. Where office markets stabilized, gains were visible; where they didn’t, valuations lagged.

Capital flows, currency and relative value

Investor flows followed the returns. As Asia and Europe recorded strong performance, capital rotated into those regions seeking yield and appreciation. Europe benefited from some inward flows as investors searched outside the U.S. for value, helped by relative financing conditions. Currency swings also played a role: dollar strength or weakness affects returns for foreign investors and can make assets in a region more or less attractive on a total-return basis.

Impact on people: renters, buyers, and retirement plans

The divergent cycle affected everyday people in different ways.

• Renters and occupiers. In markets where logistics, data centres and residential demand tightened, rents rose — which can raise occupancy costs for businesses and living costs for households. In some European and Asian cities, tighter markets translated into higher living costs or faster rent inflation during 2025.
• Homebuyers. Where mortgage costs fell or stabilized and sentiment improved, transaction volumes picked up, supporting prices. But in markets where affordability remained stretched or rates stayed elevated, buyer activity lagged.
• Institutional investors and savers. Pension funds and insurers with real estate allocations saw portfolio outcomes vary by region: allocations tilted to Asia or Europe delivered outsized 2025 gains versus North America. That feeds into broader portfolio construction decisions going into 2026.
• Workers. Construction and services jobs benefited in hotter markets, while office-dependent services in lagging downtowns felt continued pressure.

These practical effects flow from capital markets and are not uniform — they depend heavily on local policy, rent controls, subsidy schemes and labour market conditions.

Risks that cloud the picture

The strong 2025 returns in Asia and Europe do not mean the cycle is risk-free. Key risks include:

• Policy and political shocks. As recent reports noted, geopolitics and major policy shifts can quickly unsettle cross-border flows and valuations. Europe in 2025 was sensitive to political headlines that briefly curbed investor confidence.
• Interest-rate volatility. If central banks re-accelerate tightening, sectors valued for yield would be vulnerable.
• Sector concentration risk. Heavy investor interest in a few “winner” sectors can lead to crowded trades and valuation compression if demand cools.
• Local supply dynamics. Fast building or over-delivery of specific asset types (e.g., logistics in some markets) can cap rent growth.

Looking ahead to 2026: cautious optimism with a split path

Most major real-estate research groups headed into 2026 cautiously optimistic — not because every market will boom, but because improving fundamentals in some regions and sectors suggest a patchwork recovery rather than a uniform upswing. JLL’s forward outlook for global real estate in late 2025 and early 2026 pointed to brighter sentiment and improving market fundamentals, while stressing that performance will be uneven across regions and sectors.

For 2026, expect three central themes:

1. Selective recovery: Investors will continue to favour logistics, data centres, life-science labs and some living assets where occupancy fundamentals are strong.
2. Regional differentiation: Asia and parts of Europe may continue to attract capital, but political or macro surprises could shift flows quickly. North America could rebound if interest rates ease and office fundamentals show sustained improvement.
3. Active repositioning: Asset owners and managers will focus on asset-level improvements (refurbishments, repurposing offices, ESG upgrades) to protect value and secure tenants.

What investors and ordinary people should watch

For investors, the critical variables are central-bank guidance, sector fundamentals (occupancy, rents), and cross-border flow indicators. For households and occupiers, pay attention to local rent and wage trends, mortgage rate moves, and supply pipelines.

Bottom line

The 2025 global real-estate story was not one of universal recovery but of strong regional winners and clear laggards. Asia and Europe offered some of the year’s best returns, buoyed by sector strength and improving financing conditions, while North America’s slower showing reflected higher rates and sectoral overhangs. Heading into 2026, expect a selective market where careful asset choice and regional nuance — not blanket assumptions — will determine outcomes.