Improving fundamentals and more availability of capital have buoyed the real estate industry globally as a new cycle gathers pace, despite geopolitical uncertainty rattling investors.

Growing stability around inflation and interest rates and a sense that valuations are recovering have been set against volatile geopolitics and challenging economic conditions, presenting investors with a “major test of nerve,” according to the annual Emerging Trends in Real Estate Global Outlook 2026 from PwC and the Urban Land Institute.

The report is based on the views of thousands of senior property professionals from across Europe, the U.S. and Asia Pacific. It found that global volatility has prompted a shift to diversification across sectors and countries.

In terms of asset classes, the report also highlighted a resurgence in retail and office investment in select markets, particularly grocery-based retail and local shopping centres, which had gained popularity across all three regions.

Data centres continued to lead the sectors to watch for investment and development prospects across Europe and North America, while Asia Pacific respondents regard them as the most attractive niche property type for the coming year.

Other high-ranking sectors to watch included senior housing and assisted living, industrial and logistics, private rented residential, student housing, healthcare, storage facilities, hotels and affordable housing.

This year’s report also highlighted a changing approach to environmental, social and corporate governance strategies in real estate, with growing consensus in Asia that asset owners need to shift focus to deliverable and measurable initiatives. European leaders viewed ESG increasingly in pragmatic terms. In the U.S., the focus had switched to asset resilience in response to climate change.

On capital flows, PwC and ULI found that high net worth individuals, private local investors, private equity and family offices were all becoming more prominent funding sources in Europe and the U.S., while in Asia, flows were driven increasingly by expanding family offices, private banks, insurers and newer sovereign wealth funds.

“This year’s global outlook portrays an industry that is coming to terms with a changing investment landscape dramatically shaped by geopolitics,” ULI Vice President, Research and Advisory Services Simon Chinn said in a statement. “In an era where volatility might be our new normal, it’s clear that our industry’s leaders strongly believe in the resilience of real estate despite the current turbulence.”