Investor appetite for real estate has been muted this year, reducing fundraising to historic lows. 

Closed-end real estate funds raised $81.7B in the first six months of the year, the third-lowest half-year total in more than a decade, according to a report by S&P Global’s With Intelligence. Only the two halves of 2024, following a historic intervention by the Federal Reserve to raise interest rates, had a more negative fundraising environment.

Overall, capital raised slipped 5% year-over-year, while the number of funds that reached final close dropped 60% to 95. 

“Many of the challenges that have been weighing on real estate fundraising for the past several months have started to become more pronounced in 2026,” Igor Pakovic, With Intelligence global real estate research lead, said in a statement. “A combination of continued geopolitical volatility, macroeconomic uncertainty and high borrowing costs have really crimped fundraising and new fund launches, pushing institutional investors to look [to] broaden their sights for hard assets exposure.”

Fund managers themselves were less ambitious. The 276 funds launched targeted $74.3B in commitments, the lowest amount since 2017. The vast majority — 78% — directed that capital toward riskier plays with higher potential returns: value-add and opportunistic strategies.

The capital that is being raised is being concentrated into the biggest players: 40% of targeted capital through June was coming from the top 10 funds.

"Investors, their hesitancy to write the same-size check is certainly out there,” John Confrey, a real estate partner at Forvis Mazars, said at Bisnow’s National Commercial Real Estate Finance event last week. “I think people still want to invest. There's capital to deploy, but that size of the check is getting smaller.”

The largest launches in the first half include EQT Exeter’s latest industrial fund, Aermont’s latest flagship fund and Ares Management’s new real estate secondaries fund.

Meanwhile, open-end core funds suffered underperformance, asset write-downs, liquidity issues and headwinds in the office and residential sectors. Trumbull Property Fund’s redemption queue was 37% of net asset value in the first quarter, below the 50% reported in the third quarter of 2025 but more than twice the 18% record by Invesco Core Real Estate, the next highest fund. 

Many have tried to restructure their portfolios, increasing exposure to alternative sectors, including healthcare, student housing, retail and data centers.

Demand for noncore assets has surged across the board, including among more cautious investors. Noncore strategies account for 70% of first-half intentions.

Public pensions have largely avoided noncore assets for the last decade but dominated With Intelligence’s ranking of the most active mandate issuers in the first half of the year. Among them is the California State Teachers’ Retirement System, which announced plans to double the proportion of noncore strategies in its real estate portfolio by 2030.

CalPERS is the second-most active real estate investor by mandate count, with 11 mandates valued at $1.7B. The Florida State Board of Administration is in the lead with 16 mandates, valued at $1.5B, according to the report.

Though artificial intelligence growth has attracted much interest toward data centers, rapidly evolving risks due to opposition movements have led to trepidation. 

“We’re not gung-ho and saying, ‘Look, we need to pound the table on this’ because we do recognize the risk,” New Jersey Division of Investment Chief Investment Officer Shoaib Khan told With Intelligence.

Instead, investors have grown particularly bullish on senior housing strategies run by sector specialists. 

Following years of undervaluation, REITs are benefiting from the shift. Nontraded and private REITs outpaced closed-end funds and posted some of the strongest returns in years, according to the report. 

The top 10 nontraded REITs grew to $95.6B total NAV in the first six months of the year. The largest, Blackstone Real Estate Income Trust, remains a goliath, with $57B in NAV, 60% of the large, private REIT universe.

Blue Owl Real Estate Net Lease Trust surpassed Starwood Real Estate Income Trust as the second-largest private REIT in the market, with $9.3B in NAV, according to the report.

It notes that Starwood suspended redemptions from SREIT — which has $7.9B in NAV — to preserve liquidity and avoid forced sales. About 70% of its portfolio’s value is allocated to multifamily housing, a large portion of which is in the Sun Belt.