Pension funds drive global real estate rebound

Institutional investors are showing renewed confidence in global real estate, with €117 bn raised in 2025, matching the levels of the previous two years.

Iryna Pylypchuk

The INREV/ANREV/NCREIF Capital Raising Survey indicates a stabilising market after the record highs of 2021 and 2022. While all strategies saw increased activity except Asia Pacific, the survey highlights a stronger market foundation built on the return of traditional institutional investors and increased cross-border investment.

A record 83% of managers raised capital in 2025, and a remarkable 87% anticipate further growth over the next two years. Pension funds were the dominant source of capital, contributing 39% globally, their highest share since 2021. Insurance companies also significantly increased their real estate investments, accounting for 15% of global capital raised, particularly in European debt strategies. This collective return from long-term investors signals a strong belief in real estate as an asset class despite a challenging economic environment.

However, only about 30% of the capital raised in 2025 was deployed within the year, a decrease from 2024. This growing "dry powder" is starting to limit new fundraising efforts, as investors and managers are hesitant to commit fresh capital until existing funds are put to use.

Market conditions were cited by over 50% of managers as the main hurdle for capital raising in 2025, a new category in the survey. Despite this, sentiment remains largely positive, fuelled by recent capital growth.

European strategies saw a 20% increase in capital raised, reaching €35 bn in 2025. While European investors still contribute the largest share (60%), there's a notable long-term trend of increasing capital from Asia Pacific investors, reaching 25% due to Europe's relative value and diversification benefits.

For European multi-country strategies, non-listed/commingled funds remained the most common vehicle, while for single-country strategies, there was a significant shift towards separate accounts for direct real estate investment, offering greater control. Residential properties continue to be the leading sector in Europe, and data centres emerged as a new, significant investment category, reflecting the growing institutional interest in digital infrastructure.

Iryna Pylypchuk, director of Research and Market Information at INREV, said: “It is a market that has found its floor, at least at a global level. European results are more encouraging, underpinned by where the region is in its real estate cycle and the diversification benefits. This is a second consecutive quarter of strong positive net inflows, confirming positive momentum in pension funds’ and insurance companies’ long-term commitment to the asset class. In spite of the broader macroeconomic uncertainty, this is a meaningful signal for the market heading into 2026.”