At the ULI Global Capital Markets Forum, held in London on 17 June 2025, senior real estate and investment professionals gathered to explore how capital markets are adjusting to an increasingly complex world. Discussions centred on geopolitical risk, macroeconomic pressures, shifting capital flows, and evolving sector strategies—highlighting a clear trend: global real estate investors are recalibrating.

A Fragmented World Demands Sharper Focus

Geopolitical tensions and macroeconomic volatility have moved from background noise to central factors in investment strategy. The first discussion explored how capital markets are adjusting to this new normal.

While sector selection dominated the past cycle, participants noted that country selection is back in the spotlight. Core markets that offer political stability, robust legal systems, and liquidity remain top of mind. Interestingly, the United States—once the undisputed safe haven—is now viewed more cautiously due to rising concerns about tariffs, political instability, and the erosion of institutional norms.

In contrast, Europe was consistently cited as a relative bright spot. Its economic and political resilience is attracting long-term institutional conviction, even amid regulatory headwinds.

Capital Flows: Rebalancing and Recycling

Real estate transaction volumes are still below historical norms, though a brief recovery in late 2024/early 2025 gave way to renewed uncertainty after U.S. tariff announcements rattled markets. Today, transaction activity mirrors levels last seen in 2010–2011.

Still, Europe dominates global cross-border investment, with 7 countries of the top 10 global destinations for international investment located in the region, based on 20 month rolling transaction levels. But for many investors, expansion isn’t on the table—it’s about recycling capital, not deploying more of it.

The discussion also underscored a structural shift: the convergence of real estate and infrastructure. Capital is flowing into infrastructure at an accelerating pace, often at the expense of traditional real estate allocations. Real estate AUM has declined for the first time since 2009, intensifying competition for capital.

Meanwhile, regulatory pressures (notably Basel III) are reshaping commercial real estate lending in Europe, pushing banks to reduce exposure and opening the door for private credit to step in. As a result, the sector faces an equity availability challenge, not a debt crisis—debt remains accessible, but capital stacks are changing.

Market Dynamics: Cycles, Structure, and the Road Ahead

The final discussion focused on how investors are navigating sector selection, regulation, operations, and emerging structural themes. Residential real estate emerged as a standout, with pronounced supply-demand imbalances across many markets. In contrast, caution is rising around student housing due to regulatory volatility. Another area of concern in parts of Europe is “stroke of the pen” risks—sudden legislative changes that can upend asset values overnight.

Participants were candid about performance: real estate has lagged infrastructure and private equity, particularly in value-add strategies where Europe’s slower economic growth has been a drag. But a potential rebound may lie ahead, led by a recovery in core office and retail sectors—historically central pillars of the industry.

Across sectors, operational execution is now a defining theme. Investors are building in-house capabilities or partnering with best-in-class operators to drive income and preserve long-term value.

Crucially, long-term capital is setting its sights on structural trends. Climate change and AI were identified as the two most significant non-cyclical disruptors. In contrast, trends like e-commerce or hybrid work are seen as cyclical—albeit on extended timelines. Investors are preparing to “look through the cycle”, aligning capital with opportunities tied to energy, demographics, and sustainability.

The ULI Global Capital Markets Forum offered a timely lens into how real estate investors are recalibrating in the face of complexity. With geopolitical risk back on the agenda, capital sources shifting, and infrastructure becoming both competitor and complement, adaptability is the name of the game.

Europe may not offer explosive growth, but its stability, liquidity, and emerging opportunities in sustainability and energy transition make it a cornerstone for long-term strategies. Success in this new era will depend not only on picking the right markets and sectors—but on having the operational edge and structural foresight to thrive through the next cycle.

This is the latest in our series of thought leadership blogs on the key topics and talking points from the ULI Europe Conference 2025.

Save the date: the next ULI Europe Conference will take place in Berlin 1-3 June, 2026.