💡 Rethinking Real Estate: Where Real Estate Capital Is (and Isn’t) Flowing

Right now, it feels like everyone’s holding their breath.

May 03, 2025

Capital markets are frozen. Investors are hesitant. And yet—beneath the surface—a reset is underway that’s going to reshape commercial real estate for years to come.

In my conversations across the industry (and in a timely sit-down with Sabina Reeves, Chief Economist at CBRE Investment Management on The Distribution podcast), here’s what I’m seeing 👇

🚩 1. Institutions are consolidating their relationships.

✅ Large investors are doubling down on their biggest managers—shrinking their GP relationships to simplify oversight and avoid risk and gain control/leverage.

✅ Mid-sized firms—the “messy middle”—are getting squeezed.

✅ Distributions are slowing → fewer dollars recycled into new commitments → capital on the sidelines.

👉 Translation: unless you’re a scale player or a specialist with alpha, capital is harder to come by right now.

🌍 2. Global capital flows are shifting.

The U.S. is being repriced. Investors are questioning the right risk premium for U.S. exposure amid macro uncertainty.

🔹 Europe is gaining favor, driven by Germany’s fiscal expansion and Spain’s growth story.

🔹 Asia-Pacific is fragmented: Japan and Australia remain attractive; China’s capital flows are more regionalized.

📝 “We’ve moved overweight continental Europe for the first time since 2020.” – Sabina Reeves

🏢 3. The bifurcation is real—in both office and industrial.

There is a structural split between modern and legacy stock.

✅ Trophy, Grade A office: holding up, rents rising.

❌ Commodity office: functionally obsolete, redevelopment inevitable.

Same story for industrial: modern logistics facilities are in demand; legacy sheds are struggling.

Key takeaway: If it’s not future-proofed (for automation, ESG, tenant needs), it’s at risk of irrelevance.

🏠 4. Housing fundamentals remain strong—if you’re in the right niche.

Institutional rental housing is still attractive, benefiting from high mortgage rates pricing out buyers.

🔹 Multifamily holds steady.

🔹 Single-family rental and manufactured housing show resilience.

Sabina cautions: “So you'd want to look really at the underlying business model of where you're investing around resi.”

💡 5. Retail’s quiet comeback.

Sabina’s team shifted their retail view from “underweight” to “neutral”—a big move.

But the recovery is location- and format-specific:

✅ Southern Europe: destination malls.
✅ UK/Germany: retail parks.
✅ Paris/Tokyo: luxury high street.

In the U.S., retail’s rebound is less certain as tariffs and inflation squeeze the consumer.

🔬 6. AI, data, and the “corporate Ozempic” moment.

Sabina’s final warning (and inspiration):

“And that's why I find this phrase of corporate Ozempic incredibly convincing, because I feel that the blue collar kind of wave that hit in the 90s and really had a profound impact on blue collar workers in the West. We're going to see something similar with white collar work. I'm not saying it's tomorrow, but I feel that over this next decade, we're going to have to really radically rethink what sort of numbers we see flowing through into some of those work tasks which sounds really depressing, doesn't it? But we'll unleash new things to do that we can't even think of today because we're creative people.

In her view, winners will be landlords and operators who invest in tech to match tenant needs, whether that’s energy tracking, robotics, or operational data.

AI isn’t just a trend—it’s an expectation.

🎙️ Want to learn more? Listen to Sabina’s candid market insights on The Distribution podcast:

👉 Watch on YouTube
👉 Listen on Apple Podcasts
👉 Listen on Spotify

🔑 TL;DR:

✅ Investors are pausing—but repositioning.
✅ Europe’s back in play; U.S. faces repricing risk.
✅ Winners: specialists, sharpshooters, future-proofed assets and mega managers.
✅ Infrastructure + tech investment are non-negotiable.

There’s no going back to “normal.” This reset isn’t temporary—it’s transformational.

The question is: how will you adapt?

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