November 2025

North America

·Luxury New York developer, Extell, takes control of Midtown skyscraper through mezzanine foreclosure after 80% valuation drop and CMBS turmoil. The future of New York’s Worldwide Plaza has taken a dramatic turn as Gary Barnett of Extell Development quietly acquired the mezzanine debt on the iconic Midtown office tower. With both the senior and mezzanine loans in default, this move positions Barnett to potentially seize control at the scheduled UCC foreclosure auction on January 15. The tower, co-owned by SL Green, RXR, and the former New York REIT, suffered after its anchor tenant vacated, leaving occupancy at just 63%—down from 91% in 2023—with more losses ahead as Nomura plans a major downsizing. The building’s valuation has plunged by 80% since 2017, now sitting at $345 million and poised to inflict an estimated $500 million loss on CMBS bondholders. Major lenders Goldman Sachs and Deutsche Bank face heightened risk as $940 million in CMBS and $260 million in mezzanine debt remain outstanding. The case underscores ongoing distress in the Manhattan office sector, with special servicers and bondholders confronting steep write downs and uncertain recovery strategies. As refinancing challenges weigh on asset values, Extell’s opportunistic move exemplifies how high-profile developers are leveraging distress to secure prime assets at significant discounts. (Source: New York REIT Liquidating, The Real Deal, Getty, 2025)

Extell Development’s Gary Barnett, SL Green’s Marc Holliday and RXR’s Scott Rechler with 825 Eighth Avenue

·Brookfield takes 85% haircut on Denver office complex signalling deep valuation woes. Brookfield’s sale of the Johns Manville Plaza office complex in downtown Denver for under $57.5 million, an 85% discount to the $400 million it paid just before the pandemic, spotlights the gravity of the office sector’s valuation collapse. Denver’s office vacancy rate, now nearly 18%, ranks among the highest in the US, shaped by ongoing tenant downsizing and weak leasing activity as flexible work continues to reshape demand. Nationally, US office vacancy has risen to over 14%, with more than 210 million square feet of space relinquished since 2020, reflecting a profound shift away from traditional occupancy models. In the Denver market alone, tenants surrendered 2.3 million square feet more than leased over the past year, and average lease sizes have fallen by more than 40% from a decade ago, underscoring diminished appetite for office space. These adverse conditions have compelled owners like Brookfield to accept steep losses in order to realign portfolios and manage maturing loans and rising operational costs. While there are early signs that the wave of tenant move-outs is beginning to stabilise, leasing volumes remain substantially below pre-pandemic norms, and Denver’s recovery lags the national trend. The magnitude of valuation erosion in this headline sale demonstrates the persistent fragility and uncertainty in US office real estate, yet could attract opportunistic investors poised to navigate a potentially lengthy period of volatility. (Source: CoStar, 2025)

Brookfield Properties acquired Johns Manville Plaza in downtown Denver in 2020 for $400m.

·CalPERS pension fund commits $950m to residential, life sciences, industrial, and hospitality real estate and sustainable infrastructure. The California Public Employees’ Retirement System (CalPERS), one of the world’s largest pension funds, has reviewed $950 million in new commitments over three months to expand its exposure to US and Canadian residential, life sciences, self-storage, industrial, and hospitality real estate, as well as sustainable infrastructure assets. Highlights include $500 million to Carlyle Realty Partners X’s diversified opportunistic fund, $250 million to Blackstone Property Partners Life Sciences targeting labs and biopharma campuses, and $200 million to KSL Capital Partners Tactical Opportunities Fund II specialising in hotels and leisure properties. As of August 2025, CalPERS has $51.6 billion allocated to real estate, or 10% of its $572.1 billion total assets. In parallel, CalPERS’ climate solutions portfolio has nearly doubled in under two years—now at $59.7 billion—with property, renewables, and energy technology investments accounting for the largest share, reflecting the fund’s commitment to resilient long-term returns amid global energy transition trends. Major climate fund allocations include TPG Rise Climate, Brookfield Global Transition Fund II-B, and Copenhagen Infrastructure Partners, with CalPERS continuing to pursue a wide opportunity set in real assets and sustainable infrastructure. (Source: CalPERS, IREI, 2025)

·Rents decline in US Sun Belt and Mountain West apartment markets including Texas, Colorado, Arizona, and Nevada hit by oversupply. Apartment markets in the Sun Belt and Mountain West regions of the US—covering high-growth states like Texas (Austin, Dallas, Houston, San Antonio), Colorado (Denver), Arizona (Phoenix), Nevada (Las Vegas), Florida, Utah, and Tennessee—are seeing falling rents as new apartment buildings outnumber the number of people looking for homes. Large cities such as Austin and Denver recorded the biggest rent drops, over 3% in the third quarter of 2025, as vacancy rates reached high levels: above 14% in Austin and nearly 12% in Denver. In Texas, even strong leasing in Austin can’t keep up with the wave of new units, while Denver’s slow job growth means fewer renters are seeking apartments, widening the gap between new supply and demand. Other markets like Phoenix, Las Vegas, and San Antonio report rent declines of 2% to 3% for similar reasons—either too many new apartments or weaker demand from renters. Some cities, such as Las Vegas, are especially affected by a weaker economy and fewer jobs, especially in tourism. Despite these challenges, fewer construction projects are expected in 2026, which may help supply and demand become more balanced over time and eventually lead to stable or rising rents. For now, investors should expect further downward pressure on apartment rents across these key US regions until the surplus of new units is absorbed and economic conditions improve. (Source: CoStar, 2025)

Highest Year-on-Year rent growth declines since Q3 2024

·Investors close San Francisco’s largest hotel deal of 2025 at 75% discount as market shows some signs of revival. New York-based Newbond Holdings and Conversant Capital have closed the city’s biggest hotel deal of 2025 by acquiring the Hilton San Francisco Union Square and Parc 55 for $408 million, representing nearly a 75% discount from their 2016 valuation. The combined nearly 3,000 rooms equate to a price of approximately $138,700 per bedroom and account for close to 10% of San Francisco’s total hotel room inventory. The new owners plan $200 million in renovations to capitalise on upcoming major events like the 2026 Super Bowl and World Cup, marking a vote of confidence in the city's recovery from the pandemic downturn. Alongside this deal, other major investors are also active in the San Francisco hotel market: Blackstone is close to acquiring the 277-room Four Seasons hotel for $130 million ($469,000 per bedroom), while Sixth Street recently purchased The Clancy, a 410-room hotel, for $115 million ($280,500 per bedroom). The new hotel investments coincide with signs of rising tourism, growing rent, and increased interest in downtown San Francisco’s hospitality sector. Both Hilton properties will remain under Hilton management through at least 2040, ensuring operational continuity during this recovery phase. These transactions underscore early signs of confidence that San Francisco’s hospitality market is rebounding after a prolonged pandemic slump with momentum building daily. (Source: CoStar, Blackstone, The Wall Street Journal, 2025)

Parc 55 hotel and Hilton San Francisco Union square in downtown San Francisco

Europe

·Australia, Canadian, and Japanese capital to lead UK real estate investment revival in 2026. International investment into UK real estate is set to rebound in 2026, spearheaded by Australian, Canadian, and Japanese pension funds seeking strategic diversification outside their home markets. Lower interest rates and falling debt costs make UK assets attractive, unlocking accretive financing for global investors. Australian funds face mounting pressure to deploy vast reserves and are attracted by the UK’s mature office and residential sectors, with new market entrants bringing fresh capital. Canadian pension funds, having restructured their portfolios and rebalanced allocations, are returning after a lean period, drawn by high-yield opportunities and increased debt platform activity. Japanese institutions, benefiting from ultra-low domestic interest rates and currency advantages, see the UK as a stable market for logistics and office investments. These investors are prioritising operational expertise through partnerships, aiming for steady long-term returns and reduced risk exposure. Meanwhile, American private equity is repatriating capital as domestic opportunities offer better near-term returns, and Middle Eastern and wider Asian investors remain more cautious—though that may change as UK returns rise. The improved debt liquidity and strengthening economic fundamentals underpin a renewed wave of disciplined, institutional capital targeting well-developed UK sectors (Source: Green Street, JLL, IPF, 2025)

International Investment into UK by Geographic Region

Forecasted total returns by UK sector

·European office market surges as investors favour larger ticket sizes and rental growth. The European office sector has entered a new phase of momentum with average transaction lot sizes jumping to €30m in Q3, the largest seen for three years. According to Savills, office transactions exceeding €50m are up 43% year on year, driven by active cross-border investors. Norwegian, Swiss, UAE and Spanish buyers are leading the charge thus far in 2025, seeking stable yields and diversification, while established US investors continue to target both London and key continental cities. These global players are attracted by resilient prime office yields (averaging 4.87%) and robust rental growth prospects, particularly in Madrid and Milan where pricing remains favourable and government bond yield increases have been relatively muted. The surge in activity reflects a renewed confidence in European office assets: low vacancy rates mean occupiers are opting for lease renewals rather than moving, and limited new development offers landlords opportunities for prime rental uplift. Income returns stand as the main driver, with debt market focus on refinancing and lenders now more willing to support value-add and asset management schemes in prime locations. While interest rates remain comparatively high and capital expenditure by occupiers is restrained, the breadth of underbidders for quality stock and fresh signs of yield compression have fuelled expectations of further growth. With offices offering both stable income and upside potential, cross-border capital is returning in scale—suggesting a brighter outlook for European office investment as we move into 2026. (Source: Savills, Green Street, 2025)

·Hines to bet big on residential real estate as Europe dealmaking reawakens. Hines is repositioning itself to capitalise on renewed momentum in European real estate, focusing on sectors with deep supply-demand imbalances and robust growth potential. The firm sees the “living” sector—including rental housing, student accommodation, and intergenerational housing—as the most compelling opportunity globally in 2025, now accounting for around 70% of its pipeline. This conviction is underpinned by strong demographic shifts, housing shortages, and the potential for development-led value creation, especially in markets like Ireland, Spain, Germany, the Nordics, and the UK. Logistics is another core focus, with structural undersupply offering attractive fundamentals as warehouse space per capita in Europe lags behind the US and tightness persists in key submarkets. Hines believes that operational capabilities, such as hands-on asset management, brown-to-green upgrades, and development expertise, are now more critical for driving returns than financial engineering seen in past low-rate cycles. The company also highlights the accelerating convergence of real estate and infrastructure, with data centres and powered land gaining prominence in response to digitalisation and energy demands. The office market is becoming increasingly polarised, with prime, sustainable city assets outperforming, while non-core offices are repurposed for alternative uses like residential. (Source: Hines, Green Street, 2025)

Hines European Core Fund forward funded residential scheme in Marienhoefe, Berlin in November

·UK real estate and prime offices lead European returns and recovery followed by Spain, CEE (Central and Eastern Europe), and Germany. UK real estate is forecast to lead total returns in Europe from 2026 to 2030, averaging 10.3% per annum, primarily driven by prime office assets which offer the highest sector returns at 9.3% annually. Following the UK, Spain, Central and Eastern Europe (CEE), and Germany are expected to deliver robust returns across multiple property sectors, with CEE markets benefiting from high income returns and Spain showing strong rental growth. AEW’s outlook highlights the combination of prime UK offices and logistics and residential sectors as key focuses, alongside growing investments in prime offices in major European cities. Vacancy rates for offices in Europe are expected to peak in 2025 and decline through 2030, particularly in central business districts, supporting rental growth and yield tightening. Commercial real estate financing conditions have improved, with more accessible debt funding and narrowing refinancing gaps, which are encouraging investment momentum in these top-performing markets. AEW’s strategic acquisitions, backed by German capital in London, reflect this confidence in the UK office sector. Other sectors such as shopping centres and logistics also show positive returns but remain secondary to the prime office-led charge in these key European geographies. (Source: AEW, CoStar, 2025)

Total Returns by European Country

Total Returns by Sector

·Brookfield’s Citypoint Office Tower now valued at below its secured debt after 40% valuation drop. Brookfield’s Citypoint valuation has been cut by about 40% from £670M in July to £405M in October, leaving the 704K SF City of London tower roughly £50M underwater versus the £455M of senior (CMBS) and mezzanine debt secured against it. The sharp write-down reflects a combination of higher interest rates, thin liquidity for large City office assets and mounting obsolescence risk for older stock, given Citypoint’s 1960s vintage, EPC C rating and the capex required to lift it to at least a B by 2030. The failed 2024–25 sales process, where bids reportedly came in at £362M–£375M, crystallised the value gap and forced Brookfield to pivot from disposal to liability management, since any sale at those levels would not clear the capital stack. Noteholders have agreed to extend the CMBS and senior loan maturity to around January 2028, typically in return for a higher margin and tighter terms, effectively buying time in the hope that pricing, leasing and interest rates move in their favour. However, the structure remains stressed, with interest on the c.£92M mezzanine tranche being paid-in-kind rather than in cash, meaning the effective debt burden is rising even as headline valuations fall. On the income side, the tower is fully let and generates about £38M per annum of rent, but noteholders are focused on the 2030 lease expiry of Simmons & Simmons, which puts around 20% of cash flow at re-letting risk in a market increasingly favouring prime, ESG-compliant product. For creditors, the extended maturity is therefore a deferral rather than a cure: recoveries now depend on successful repositioning, backfilling future vacancies and a cyclical recovery in yields to close the current value–debt gap before the new 2028 deadline (Source: Bisnow, Brookfield, CoStar, 2025)

Brookfield’s Citypoint Office Tower valued at below the mezzanine loan tranche, resulting in further CMBS ratings downgrades.