A slowdown in real estate investment probably won't be visible in second-quarter deal figures, but volumes for 2025 are unlikely to be as high as they might have been due to economic uncertainty caused by U.S. trade and fiscal policy.

“The Q2 number is very healthy — we expected to see a slowing down of activities, but actually it's not,” CBRE Global Head of Research Henry Chin said at the annual National Association of Real Estate Editors conference in New Orleans on Tuesday.

Looking further out, however, the impact of uncertainty is likely to be felt more tangibly. Investors are increasingly in “wait-and-see” mode, with higher 10-year Treasury rates and the prospect of lower U.S. economic growth causing a pause in activity, Chin said.

Global deal volume for 2024 was just shy of $800B. At the start of the year, CBRE expected a decent double-digit rise in volumes in 2025. Now, that rise is likely to be around the 10% mark, Chin predicted.

That means this year will be in line with 2020, the year the pandemic hit. The next-lowest annual investment total would require rewinding to 2014.

Some U.S. institutional investors are increasingly looking to diversify internationally because of uncertainty in their local markets, Chin said. Europe is likely to be the main beneficiary, especially London.

“Given the current situation we are in, more and more capital allocators in the U.S. are thinking about going international,” he said.

London certainly needs the boost right now. In the first quarter of this year, it ranked fifth for real estate investment, behind New York, Tokyo, Los Angeles and Dallas. London would more typically be challenging New York for the top spot.

The London market has repriced, but not quite enough to attract global investors in force. A rerouting of capital from the U.S. could change that, Chin said.

Tokyo's prominence highlights the importance of interest rates for real estate investment. The city has strong economic fundamentals, and interest rates did not rise in Japan nearly as high as in the U.S. and UK, Chin said. Investors are piling in.

Chin said CBRE believes fear about a U.S. recession is overblown, adding that office leasing levels are recovering well. On a global basis, office leasing is set to rise by 5%-10% in 2025, and at 6.5%, U.S. office cap rates are higher than in any other part of the world, making them attractive to investors.

One fly in the ointment for the sector in the U.S. could be high levels of office debt that is at or close to maturity — about $200B in 2025 and $100B in 2026. Older properties are likely to find it hard to win new debt, which could push more assets to the market.

Those office loans are part of $1T of U.S loans hitting maturity in 2025, Chin said. But changes in the makeup of the debt market are likely to mitigate some of the stress.

The continued growth of nonbank lenders could help borrowers find new financing. Such lenders are increasingly stepping in to fill the gap left by banks that are pulling back from the market. At times of higher-for-longer interest rates, debt provides good risk-adjusted returns, Chin said.

Another expected trend for the remainder of 2025 and beyond is a potential increase in buyouts of listed real estate companies by private equity firms, Chin said.

REITs in the U.S. are trading at an average discount of 20% to their net asset value. The last time this discount was so large, in 2020, it precipitated a wave of takeovers the following year.