Private equity investors have become a major force in global real estate, but a model that relies on buying, fixing and then selling on a rinse-and-repeat cycle in order to deliver returns and attract new funding has been turned on its head by geopolitical uncertainty.

For private equity executives, no deals equals no fees, and not being able to sell makes it hard to raise new money. After some underwhelming postpandemic years, private equity houses that piled in to property over the past 10 years could yet be tempted to shift their focus to major growth opportunities like tech and AI and away from real estate.

And even for those that do stay the course, there is a need to realign targets and adjust operating models.

“There's a lot of money here for private equity, but it's concentrated within a number of very large groups,” Evonite partner Jose-Luis Pellicer said. “Private equity tends to be active when there is an opportunity, or when there has been a lot of repricing. There has been some since 2022 but it hasn't been massive, so this is not the opportunity of a lifetime, as it was back in 2010. Therefore, all that capital seeking high returns is having a hard time being allocated.”

According to Preqin's Global Report 2025: Real Estate, Europe-focused private real estate funds raised approximately $12B in the first three quarters of 2024, reflecting a 46% decrease compared with the same period in 2023.

Private equity is still interested in raising real estate capital “because that's what they're set up to do”, Hodes Weill & Associates Managing Director London Jonathan Read said, albeit that those specialising in sectors such as office are finding the market far more challenging.

On the fundraising side, he reflected that 2024 was the worst year since 2012 and blamed that on both a struggle to attract capital but also a slower transactional market.

“They always say to us, we need you guys to raise money to invest. But by the same token, they have to do deals for us [to raise money]. It works both ways,” Read added. “However, they are picking back up.”

The volatility of President Trump’s U.S. administration has introduced uncertainty, but Read believes there is more optimism given the potential of a lower interest rate environment and a calming of inflationary pressures.

“We haven't seen a lot of distress, but we have seen some stress, so some are saying, ‘I've held on to this for long enough now’,” he said.

In many cases, the investors who put their money into funds are waiting to receive cash back from older vehicles before they pony up fresh capital. But the fall in values and slower transactional market has made selling difficult for fund managers.

MSCI reported a “loss of momentum” for transactions in the first quarter of 2025 but added that real estate’s underperformance versus other major private and public asset classes in the last 24 months, which has led to a slump in fundraising, could change if interest rates fall and real assets are seen as a stable hold.

In the decade until 2024, private equity fund investment peaked at an estimated £31.8B in 2017 in Europe — excluding the UK — and £13.6B in the UK, MSCI figures for Bisnow show. After recovering to £14.3B in 2022, a sharp contraction to just £5.5B followed in 2023 before European investment returned to £10.5B last year. In the UK, post-pandemic volumes peaked in 2021 at £6.2B before dipping to around half that in 2022 and 2023 then recovering to £5.1B last year.

For those with money, how they spend it is changing, and managers are having to work a lot harder to hit return hurdles.

“We've still seen a tremendous amount of private equity capital in the market, but that focus has been on different sectors," CBRE Managing Director Head of European Capital Markets Chris Brett said.

The firm's investor intention survey showed the majority of respondents wanted to look in the living space and at multifamily, purpose-built student accommodation and other parts of that sector.

“There is still a deep demand from private equity around the thematic on logistics, plus evidence of recent bidding around retail,” he added. “I'm quite positive on private equity in real estate today. The market jitters from 2023 mean time frames are just elongated.”

Much of the uncertainty around real estate has been influenced by macro issues beyond the realm of property, and Brett said this is an investment topic in its own right.

“Consistent disruption has become a theme,” he said. “The desire to invest in repriced durable income has become the theme. And repriced durable income has been living, logistics and is becoming retail. But with a slightly longer time horizon.”

The main beneficiary of that political instability might yet be Europe and its relatively benign property sector, according to Savills Director of European research Mike Barnes, who highlighted the UK has attracted capital from private equity, much originating from the U.S., as have the Netherlands and Spain.

“The fall in debt costs is making it a lot more competitive, margins are coming in, which will increase the spread between prime yields and all-in debt costs, supporting investment activity,” Barnes said, citing retail and hotels as asset classes where private equity has been willing to take on more risk, buoyed by tourism and potentially looking outside major cities, while more willing to take on scale.

He anticipates more European buyers seeking price dislocation, such as German investors looking cross border, though he said the fundraising side for private equity remains challenging but could benefit from uncertainty in the U.S.

“Is there a European reallocation story? There are cheaper debt costs and though the growth fundamentals have been downgraded by tariffs, they still support rental growth,” he said. “There is a safe haven aspect as well. Stability is what investors are looking for when it comes to fundraising.”