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Real Estate Strategic Outlooks: Mid-Year 2025

2025-06-30

The Real Estate Strategic Outlooks reflect the DWS Real Estate Research team's opinions of the various aspects of Real Estate markets across the United States, Europe, and Asia Pacific. This information represents our theoretical views on Real Estate markets globally and do not intend to comment on any DWS products or strategies or serve as investment advice, a recommendation, an offer or solicitation.

Kevin White

Global Co-Head of Real Estate Research

Simon Wallace

Simon Wallace

Global Co-Head of Real Estate Research and Head of Real Estate, UK

Koichiro_Obu_headshot

Koichiro (Ko) Obu

Head of Real Estate Research, Asia Pacific

Real Estate Strategic Outlooks

United States

The U.S. real estate market began 2025 with renewed strength, showing positive returns across all major sectors,[1] including a surprising rebound in the office segment. This recovery was driven by stabilizing  and improving fundamentals, particularly in the residential sector, which saw record despite high supply levels. However, policy uncertainty—especially around tariffs, immigration, and fiscal policy—has introduced macroeconomic headwinds. While these factors may slow growth and keep interest rates elevated, they are not expected to derail the recovery. Instead, they may create long-term upside by suppressing new supply and supporting rent growth.

Strategically, the report maintains a preference for the industrial, residential, and retail sectors, with a geographic focus on the Sun Belt and Mountain West regions. Residential real estate is favored due to persistent housing shortages and affordability challenges, which are expected to intensify as tariffs raise construction costs. Industrial assets are expected to be resilient in the long term, benefiting from onshoring trends, despite near-term risks from reduced trade and consumer spending. Retail continues to perform well, led by necessity-based tenants and limited new development, while the office sector remains under pressure from high vacancies and structural shifts in work patterns, though signs of stabilization are emerging.

Looking ahead, the report anticipates a transitional phase marked by declining new supply and steady demand, particularly in the residential and industrial sectors. Rent growth is expected to accelerate in 2026 as supply pipelines dry up. The analysis highlights a greater emphasis on residential and industrial assets, a more cautious stance toward office, and a selective approach to retail, particularly in segments such as grocery-anchored centers. The outlook is cautiously optimistic, with the belief that demographic trends, affordability constraints, and evolving consumer behaviors will support real estate fundamentals despite ongoing economic and policy uncertainties.

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Europe

The European real estate market has entered a phase of recovery, buoyed by improving liquidity, supportive fiscal policies—particularly in Germany—and persistent supply constraints. The report highlights that despite global uncertainties, Europe’s real estate sector is benefiting from capital inflows, resilient occupier fundamentals, and a favorable macroeconomic backdrop. Germany’s €1 trillion fiscal stimulus has notably improved the regional economic outlook, while European REITs have outperformed their U.S. counterparts.[2] Supply shortages, especially in residential and logistics sectors, are expected to support rental growth and capital value appreciation, with vacancy rates in Europe remaining structurally lower than in the U.S.

Strategically, the report emphasizes a strong preference for the living sector, including residential and student housing, due to chronic undersupply and robust demand. and value-add Living strategies are favored, particularly in commuter zones and regional hubs with affordability advantages. Logistics, in our view, remains attractive in select markets, especially those tied to defense and onshoring trends, though some trade-exposed areas have been downgraded. Office and retail sectors require more selective approaches, with prime locations and grocery-anchored retail parks potentially offering the best prospects. Niche sectors like data centers and senior living are gaining traction but remain limited in scale and accessibility.

Geographically, Germany leads the outlook with strong fundamentals across sectors, while Spain, Poland, and select Nordic and Benelux cities also show promise. The UK and France face more mixed prospects due to fiscal and economic headwinds, though regional cities like Manchester and Lyon offer potentially compelling opportunities. Sector-specific forecasts suggest continued rent growth in residential and logistics, modest gains in office, and a cautious but improving outlook for retail. Overall, the report underscores that European real estate may offer a stable and attractive investment environment amid global volatility, with structural trends and local dynamics driving performance.

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Asia Pacific

The Asia Pacific real estate market appears poised for a potential upcycle within the next 6 to 12 months, supported by easing monetary conditions, appears relatively attractive valuations, and stabilizing investment sentiment. While macroeconomic uncertainties—particularly those related to tariffs—pose risks to export-reliant economies like China and Vietnam, domestic consumption-driven markets such as Australia, South Korea, and parts of Japan are expected to remain resilient. Supply constraints, driven by rising construction costs, are expected to limit future vacancies and support rental growth across logistics, office, and residential sectors.

Sector-wise, logistics and residential assets are forecast to perform strongly due to robust demand and constrained supply pipelines. In Japan and South Korea, logistics rents are expected to rise significantly from 2026 onward, while Australia’s residential market continues to benefit from tight vacancies and strong migration-driven demand. Office markets show a mixed picture: while Sydney, Brisbane, Seoul, and Osaka are seeing strong occupier demand and attractive yields, cities like Melbourne and Hong Kong face elevated vacancies and macroeconomic headwinds. Retail remains the weakest sector, with structural challenges and cautious consumer spending limiting growth potential. 

Strategically, the report highlights growing investor interest in the living sector, particularly Australia’s Build-to-Rent (BTR) market, supported by favorable demographics, affordability gaps, and recent tax incentives. Co-living is also gaining traction in dense urban markets like Tokyo, Seoul, and Singapore, offering flexible, community-oriented housing solutions. In logistics, the focus is on domestic demand hubs and urban locations, avoiding export-heavy regions. Overall, the report underscores a cautiously optimistic outlook for Asia Pacific real estate, with selective potential opportunities across sectors and geographies driven by structural trends and evolving investor preferences. 

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1

NCREIF. As of 3/31/2025

2

EURO STOXX 50 Index and FTSE EPRA/NAREIT Developed Europe Index; Credit Spread = Euro 10-Yr BBB Bond vs. German Bund Source: Macrobond, 06 June 2025

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