January 2026

North America

·Realty Income teams with GIC on $1.5bn North America logistics push. Realty Income has launched a $1.5 billion partnership with Singapore’s GIC sovereign wealth fund, targeting U.S. industrial development, a $200 million Mexican logistics commitment with Hines, and GIC capital into the REIT’s U.S. net-lease portfolio. The deal marks Realty Income’s first foray into Mexico, capitalising on the country’s nearshoring boom driven by USMCA trade, low labour costs, and fiscal incentives from President Claudia Sheinbaum. The structure allows both partners to scale investments over time, diversifying Realty Income’s funding beyond public markets while accessing GIC’s long-term capital for higher returns. In the U.S., the JV will develop build-to-suit logistics facilities pre-leased to investment-grade tenants, with Realty Income retaining majority ownership. The Mexico tranche targets industrial properties in Mexico City and Guadalajara, financed jointly and acquired by Realty Income post-completion on USD-denominated leases to Fortune 100 occupiers. GIC’s involvement underscores conviction in net-lease logistics for predictable cash yields amid sustained demand growth. This follows Realty Income’s $800m CityCenter Las Vegas JV with Blackstone, highlighting the REIT’s prowess in structuring multi-asset deals with top-tier institutions (Source: CoStar, Realty, GIC, 2026)

Walnut Hill distribution center near Dallas Fort Worth International Airport acquired by Realty Income in September 2025

·Nuveen takes Chicago office tower ownership from Hines consortium via $74mn debt conversion. Nuveen has transitioned from lender to owner of Chicago’s 896,502 sq ft 321 N. Clark Street tower by converting $74 million of mezzanine debt into equity, effectively taking control from the previous ownership group including Hines. This structured debt-for-equity swap followed the property’s $296 million 2021 refinancing, where Nuveen held mezzanine exposure, amid sustained office value declines since the 2016 $340 million acquisition. The transaction allows Nuveen, partnering with Pacific Coast Capital Partners, to retain upside potential while injecting capital for tenant-focused upgrades like enhanced conferencing and lounges. Mezzanine conversion mitigates foreclosure complexities, providing lenders with ownership skin-in-the-game to actively reposition assets rather than pursue quick sales at depressed prices. Chicago River North’s prime positioning has sustained 77% occupancy despite exits like CBRE, outperforming secondary markets. Nuveen’s $142 billion real estate AUM enables sophisticated value-add strategies, blending debt origination with asset management expertise. This approach signals lenders’ growing confidence in selective office recovery plays where location and repositioning can recapture pre-pandemic yields. The deal highlights mezzanine as a pathway for institutional investors to pivot from credit to equity amid cycle troughs. (Source: CoStar, Nuveen, 2026)

Nuveen changes from lender to owner on 321 N. Clark St., Chicago

·Industrial funds capital raising shrinks to 2018 lows as capital pivots to data centres and small bay. Capital raised for traditional industrial investment funds slumped to $9 billion in 2025 – the lowest since 2018 – as oversupply in large logistics warehouses drove investors toward data centres and niche small bay properties. Fund size targets halved from 2024 levels, with average targets dropping from $658 million in 2022 to just $215 million last year, reflecting muted rent growth and soaring vacancies in bulk distribution. Data centre funds captured 50% of 2025 commitments, exemplified by PGIM’s $2 billion Global Data Center US Fund targeting hyperscale “build-fill-sell” opportunities and Digital Realty’s oversubscribed $3 billion U.S. Hyperscale Fund across key tech markets. Faropoint’s $1 billion Flagship Industrial Value Fund IV, backed by Texas Teachers, targets 200-250 small bay assets (20k-100k sq ft) exploiting mark-to-market upside in gateway and secondary markets. Small bay listings remain 20% below pre-pandemic norms versus abundant big-box supply, creating a bifurcated opportunity set. Newer post-2020 large logistics assets showed positive absorption in late 2025 as construction slowed, stabilising 22% vacancy rates in select markets. Investor flows will likely remain focused on data centres and small bay through 2026, with selective big-box opportunities emerging where supply-demand balances. (Source: CoStar, 2026)

Industrial Fund Capital Raising Targets

·US office sales surge 20% to $56 bn as institutions reclaim 25% share of market. US office investment sales volume hit over $56 billion in 2025, up $10 billion or more than 20% from 2024, outpacing all other major property sectors amid stabilising rates and occupancy gains. The 10-year Treasury yield eased from above 4.5% early in the year to around 4.1% by Q4, restoring confidence for loans and deals across commercial real estate which rose $25 billion overall. National vacancy peaked mid-2025 before net absorption turned positive earlier in strongholds like New York and Dallas backed by a generationally low construction pipeline constraining supply. CoStar’s Commercial Repeat Sales Index held flat after three years of sharp declines, with cap rates steady at 200bps above late-2021 levels; values remain ~45% below cyclical peaks. Institutional buyers surged from under 20% of office purchases in 2024 to above 25% by year-end, their highest share since 2021 and a key driver of the rebound. San Francisco exemplified the trend, with office sales more than doubling including 300 Howard Street’s deeply discounted institutional sale versus its 2019 valuation. For institutional investors, this signals restored conviction in premium offices acquired below replacement cost, balancing risks with outsized return potential. (Source: CoStar, 2026)

Share of Purchased Value in Offices by Buyer Type

Share of Commerciale Real Estate Sales Volume by Property Type

·K-shaped economy powers US luxury hotels over economy segment. The US hotel industry in 2025 exhibited a stark K-shaped divide, with luxury hotels posting 3% RevPAR growth while economy class suffered a 4.4% decline. Affluent high-end consumers, buoyed by stock market gains and property wealth, sustained premium travel spending and granted luxury operators 3% room rate hikes despite flat occupancy. Lower-income households, squeezed by inflation on essentials, cut travel frequency and budgets, eroding demand for affordable limited-service properties. Corporate headwinds compounded pressures: nine months of declining group demand, inconsistent midweek bookings, and 4.2% YoY drop in international air arrivals – partly diverted to cruises. Luxury maintained pricing power via upscale experiences, while economy/midscale struggled with sub-inflation rate growth and mid-50s% occupancy versus luxury's high-60s%. Looking to 2026, CoStar forecasts luxury RevPAR growth persisting amid subdued overall performance, boosted by FIFA World Cup host cities and long weekends – though insufficient to lift economy segments. For institutional investors, this bifurcation favours selective deployment into luxury assets where resilient high-net-worth demand supports stable returns. (Source: CoStar, 2026)

Revenue Per Available Room (RevPAR) YoY Percentage Change by Hotel Class Segment 2024 v 2025

Europe

·Deka’s £220m London office buy delivers 5.2% yield as core capital returns. German fund manager Deka Immobilien is making its first London office acquisition since 2021, going under offer to buy Stirling Square in St James’s for just under £220 million at a yield of about 5.2%. The move signals a renewed wave of core European capital targeting the capital’s prime office market after several years of caution. The 93,500 sq ft Grade A asset, fully let to Citigroup and BAE Systems, was launched for sale by Tristan Capital Partners and Greycoat with Savills and Newmark advising. Blackstone and other major investors also bid, highlighting revived competition for high-quality West End offices. Deka’s interest reflects confidence that London office pricing has recalibrated, offering sustainable income and upside potential. Stirling Square’s 125-year headlease from the Crown Estate, prime St James’s location and full occupancy since 1999 add to its institutional appeal. Passing rents average £134/sq ft, below nearby prime levels above £225/sq ft, presenting a reversionary growth opportunity. Contract exchange is expected shortly, underscoring London’s re-emergence as a destination for long-term core capital deployment. (Source: Green Street, Deka, 2026)

Stirling Square is Deka’s first London office purchase since summer of 2021.

·Canadian pension giant, Norwegian sovereign wealth fund, Japanese corporates herald £150m+ London office deals as new normal. Canadian PSP Investments has bought out Gingko Tree’s stake in Tishman Speyer’s Holborn Circus, funding a £400m refurb of Sainsbury’s ex-HQ into premium sustainable offices, with works starting H2 2026. Norwegian sovereign wealth fund Norges completed its circa £300m purchase of Spitalfields’ Fruit & Wool Exchange from M&G, recycling capital from a mature core asset amid market stabilisation. Japan’s Daibiru Corporation sealed a reported £300m acquisition of Warwick Court – ex-Goldman Sachs HQ near St Paul’s – marking its second London buy after June’s £169m Capital House deal. The 210,000 sq ft refurbished BREEAM Excellent scheme is anchored by T Rowe Price (143,000 sq ft) and Mitsui Bussan, underscoring strong City pre-letting appeal. Daibiru cited London’s enduring liquidity, transparency and post-Brexit financial hub status as key to positioning its UK assets as overseas core holdings. These three £300m+ trades alongside Nuveen’s £335m Can of Ham sale confirm £150m-plus Central London office transactions are accelerating after 2024’s liquidity drought. For institutional investors, the re-engagement of Canadian pensions, Nordic SWFs and Japanese corporates evidences pricing normalisation and conviction in ESG-compliant prime workspaces. (Source: Green Street, CoStar, Tishman Speyer, Daibiru, 2026)

PSP Investments returns to London offices for Sainsbury’s former HQ, 33 Holborn

·Falling rates tip the balance back to equity in real estate investing. After two years of dominance, real estate debt’s advantage over equity may be fading as falling interest rates and stabilising asset values shift investors’ focus. Higher debt yields have provided solid downside protection while equity returns lagged, but AEW forecasts that unlevered returns from prime European real estate will average 8.4% annually this decade, compared with sub-4% borrowing costs. This widening equity premium is sharpening interest in core assets, especially in Continental Europe where rates have fallen faster than in the UK. Analysts suggest the market has reached a turning point: risk-adjusted equity returns now appear more compelling, while rising competition in debt markets is eroding underwriting discipline. Lazard’s James Jacobs expects a gradual reallocation from real estate credit toward core equity, though debt will remain an essential part of institutional portfolios. INREV data supports this trend, with 39% of investors planning to increase equity allocations versus 38% for debt funds, a reversal from last year. Nonetheless, many investors plan to grow both exposures as institutions rebalance property portfolios after years of under-allocation. Despite equity’s comeback, voices like Prestbury’s Nick Leslau warn that macroeconomic and political risks warrant continued caution and selective positioning on both sides of the capital stack. (Source: Green Street, INREV, Lazard, Prestbury, 2026)

Changes in real estate allocations in Europe between 2025 and 2026

·Australian pension fund, Aware Super, acquires 31% stake in EUR 2.6bn European outlet malls as it bets on retail asset class recovery. Australian superannuation fund Aware Super has acquired a 31.3% stake in the €2.6 billion European Outlet Mall Venture (EOMV) platform, deploying significant capital into resilient retail at a time of re-rating yields. The deal with PIMCO-managed Allianz vehicles values the four-asset portfolio – including top-performing outlets at Serravalle (Italy), Roermond (Netherlands) and Parndorf (Austria) – at a core-plus yield profile attractive for long-term income stability. Outlet retail has outperformed broader shopping centres through economic cycles, offering defensive qualities via discount-driven footfall (c.25 million annual visits) and inflation-linked leases. For Aware Super, the investment diversifies its A$210bn portfolio into undervalued European physical retail, where pricing has corrected sharply and rental growth prospects have improved post-pandemic. Joining Dutch pension APG and a French institution, the buyers retain McArthurGlen’s specialist management to maximise operational efficiencies and asset value. The transaction signals growing conviction among global pensions that dominant outlet platforms provide compelling risk-adjusted returns amid stabilising consumer spending. Clifford Chance advised on the cross-border structure, underscoring institutional interest in scaled, income-secure real estate as rates ease. (Source: CoStar, Reuters, Green Street, Aware Super, EOMV, 2026)

Seravalle Designer Outlet in Italy is part of the European Outlet Mall Venture

·M&G sees new real estate cycle with UK and European core opportunities topping 2026 picks. M&G declares real estate past its cyclical low, entering a new recovery phase as stabilising values, rental growth and supportive debt markets draw global allocators back to UK and European assets. Asset allocators are increasingly targeting the region after years of neglect, with Asian inflows rising and European capital staying onshore amid relative value opportunities. Investment volumes across Europe rebounded timidly to €250 billion in 2025, up €100 billion from 2023, spurring pan-European core strategies alongside value-add plays. Residential leads M&G’s allocations at 30% (heavily weighted to student housing undersupply), followed by resilient industrial/logistics, with grocery-anchored retail warehouses now and broader retail/offices eyed for 2027 alongside hotels. UK repricing has accelerated faster than continental peers, fuelling overseas demand particularly for London where development stasis creates scarcity premiums. Standouts like M&G’s 40 Leadenhall office and shopping centres (Manchester Arndale, Cribbs Causeway at 0.4% voids, Bluewater) demonstrate revived occupational tension via footfall and occupancy gains. Lenders remain selective on beds and sheds but warming to retail, while AI’s long-term urbanisation effects could boost demand for science-enabled living solutions. Despite US tariff threats, investors’ uncertainty tolerance has hardened, viewing real estate’s relative value as a buffer against escalating geopolitical noise. (Source: CoStar, M&G, 2026)

M&G’s office development: 40 Leadenhall, City of London