International investment flows are gradually returning to the European market, though with notable regional disparities that reflect varying levels of investor confidence and operational stability. However, this recovery is proceeding at different speeds across jurisdictions.
The UK market demonstrates particularly compelling fundamentals, driven by its relatively stable political and economic environment, its legal transparency and protection, a lack of restrictions on foreign ownership, a continued reputation as a global financial hub, and currency advantages for many overseas investors. The age of its real estate stock, and limited space for green-field new development consequentially gives rise to a need for significant investment in modernisation and repositioning. This creates opportunities for value-add strategies, but success requires sophisticated asset management capabilities and clear strategic vision for property transformation.
France presents a more complex picture, where investor trust requires active restoration following operational disruptions and transaction stagnation. The French market's activity levels remain at approximately 30% of historical norms from 2-3 years ago, compared to the 70-80% typical range.
The investment environment in some countries is difficult, but this also creates opportunities for strategic players to stand out. Whilst superficial or short-term approaches to asset management will get you nowhere, operational excellence and clear value propositions will create the confidence needed to win over investors.
Alexandre Garrigues Associé
In an unstable economic environment, client expectations have evolved significantly, with institutional investors focusing intensively on long-term scenario planning that extends well beyond traditional investment horizons. Clients are examining debt strategies, interest rate sensitivity and operational flexibility across multiple potential futures, requiring REIM managers to demonstrate comprehensive understanding of how their strategies perform under various macroeconomic conditions. Comprehensive scenario analysis also includes examining changes like supply chain disruption, conflict and trade policy changes.
Today’s investment decisions must withstand a broader range of potential futures. The most successful firms will be those who can balance creative forward thinking with analytical rigour.
Lucy Hampson Partner - Asset Management
For those seeking funding, this increased scrutiny means thorough preparation is more essential than ever. Funds are less likely to work with those who haven’t accounted for uncertainty in their initial pitches, preferring to collaborate with those whose proposals demonstrate both anticipation and mitigation of market movement risks. In this environment, a failure to articulate compelling long-term visions and resilience means conversations ending before they properly begin.
Diversifying risk has become an increasingly mathematical pursuit, requiring sophisticated analytical frameworks. Traditional geographic and sectoral diversification approaches are being supplemented by more nuanced strategies that account for correlation patterns during stress periods and exposure to specific macro-economic variables.
The most resilient sectors during those downturns were healthcare, residential and logistics, providing empirical guidance for defensive positioning. However, successful diversification now requires understanding not merely which sectors perform well in isolation, but how different asset classes interact during various stress scenarios, including those created by trade policy uncertainty and geopolitical instability.
The current environment favours assets with critical value and reduced exposure to supply chain disruptions. These sectors benefit from demand drivers that transcend cyclical economic variations, providing more predictable returns during uncertain periods. Data centres, critical infrastructure and logistics buildings, for example, represent "safe ground" investments that are less susceptible to tariff impacts once operational, contrasting sharply with component-driven sectors such as automotive that face ongoing input cost volatility. Of these sectors, logistics is currently top in terms of investment volumes, which should continue into 2026, and the continued growth of AI driving the demand for colocation data centre space.
As liquidity suffers in other investment areas, real estate is becoming increasingly attractive to investment managers. Hybrid funds are seeing a lot of success in the market, especially those invested in listed companies where liquidity is less of a hurdle for new investment. These structures allow for the sort of adaptable investment strategies needed to secure returns amidst uncertainty.
This structural innovation reflects broader changes in how institutional investors approach portfolio construction. Passive real estate strategies merely collecting rent for an income return are less appealing, whilst interest is growing in niche property sectors to add value or identify opportunities for long-term asset management.
Success in the current environment increasingly requires adopting a finance mentality alongside traditional real estate expertise, combining the practical asset management skills of real estate with the innovative drive of finance. This dual approach enables REIM managers to identify diverse applications for assets and extract maximum value from each investment, in turn making REIM more resilient amidst uncertainty.
A global outlook has also become essential for identifying the full spectrum of available opportunities. Whilst the logistical challenges of operating internationally do create some risk, opportunities in other regions, sectors and asset classes can help diversify portfolios and secure returns against instability. The last few years in particular have demonstrated that an overly localised portfolio is susceptible to stagnation if the local market is hit. So, whilst sourcing global expertise and advice may be necessary for expanding horizons, many firms find it worth it for the added resilience to their portfolio.
The divide is growing between prime and secondary assets, especially in geographically small and historically established countries with fewer high potential assets. The need for modernisation and repurposing in these environments makes some assets less suitable as high value investments, driving increased competition and transaction activity around high-quality properties and requiring sophisticated operational strategies to generate acceptable returns.
Meanwhile, secondary assets, those that are less easily modernised, poorly located or overly protected in both usage and physical condition, face reduced investor interest. These will require long term strategic vision and substantial asset management capabilities to generate value, but as the price gap continues to grow, those who are up to the challenge of repositioning and transformation, and who have patient capital to play with, could unlock significant returns over time.
In the meantime, this gap will likely be increasingly polarised, with rents and valuations diverging between “the best” and “the rest”.
The REIM landscape moving into late 2025 and early 2026 rewards strategic thinking above opportunistic positioning. Despite short-term hurdles, the global real estate market is set to grow, yet accessing this growth requires sophisticated approaches that combine financial analytical capabilities with solid real estate expertise.
As the sector continues its gradual recovery from recent disruptions, the premium placed on strategic clarity and operational excellence will only intensify. War, conflict and political instability continue to impact capital flows, creating both challenges and opportunities for managers who can navigate complexity whilst maintaining clear strategic direction. The firms and investees that will thrive in this complex but potentially rewarding investment environment are those that embrace comprehensive due diligence, maintain international perspectives and demonstrate the creative long-term vision necessary to transform potential into performance.
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