Climate risk, geopolitical uncertainty and the rise of AI reshaped markets in a year where adaptability defined outperformance.
2025 was a year of significant change – fitting for our 2025 Impacts theme of ‘Adapt’. It was a year of economic and geopolitical volatility, with real estate markets, occupiers, investors and institutions needing to adapt in order to succeed. Yet it also demonstrated the growing resilience of global real estate. What were 2025’s key takeaways?
Early in January, the Los Angeles wildfires dominated global headlines, becoming the most destructive in the city’s history and setting the tone for a year in which extreme weather events were a constant theme. This reinforced the urgency of climate resilience in real estate. Rising insurance and operational costs led occupiers to seek out adapted real estate in more resilient locations, while investors increasingly factored climate exposure into their decision-making.
On the geopolitical front, tariff announcements from the new US administration created uncertainty, contributing to a more subdued global economic environment than first anticipated. With fiscal loosening arriving later and slower than forecast, this was particularly felt in global capital markets. At the sector level, it weighed on the industrial and logistics sectors in the US, where many adopted a wait‑and‑see approach. While economic conditions are set to not be markedly different in 2026, we’re nonetheless anticipating a steady improvement in investment.
Occupier markets showed resilience. In the office sector, the flight to best in class and a lack of stock drove prime office rents to new heights, while leasing volumes recovered. Constrained development markets saw elevated financing costs, building material price inflation, and skills shortages drag on delivery. These were pressures felt across all sectors, including residential, where affordability challenges intensified worldwide. These trends are likely to continue this year.
We saw flows of people and capital diversify to more locations. While established global cities, such as London, New York and Tokyo continued to see the lion’s share of activity, new locations entered the global top tier. 2025 was a standout year for Dubai, topping our inaugural HNWI Hotspot Index, benefitting from high-levels of in-migration, business and lifestyle appeal. Shifting global labour market dynamics, meanwhile, led organisations to rethink where and how they access talent. India emerged as a major beneficiary; with global capability centres expanding to tap into its vast skilled talent pool.
Perhaps the most enduring legacy of 2025 will be its role as the year AI truly entered the mainstream. While the full impact is still to be realised, the concentration of AI firms in key cities is already visibly shaping real estate markets. San Francisco re‑emerged as our top Tech City, a global hub for AI attracting talent and capital at scale, fuelling a some recovery in its office sector.
There’s positivity in the outlook for 2026, though as the opening month has shown, volatility is here to stay. But if there’s anything that 2025 taught us it is that adaptability is now the defining characteristic of outperforming real estate, whether in response to climate risk, technological disruption or shifting capital flows.
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