🚨Global CRE investment volume held steady at $380B in H1 2025, but sector allocation is shifting. Office transactions rose 12% YoY, while industrial and residential dipped slightly. Investor demand is concentrating in data centers, with projected +18% capacity growth through 2026, and ESG is now a top-three investment driver. For U.S. capital flows, this signals a repricing: compliant assets enjoy –25 bps cap-rate premiums, while non-green stock risks stranded valuation.
Global CRE Investment: $380B, H1 2025 (flat YoY) — [Source: Savills].
Office Transactions: +12% YoY, H1 2025 — [Source: Savills].
Data Center Demand: +18% projected capacity growth through 2026 — [Source: Savills].
Green Asset Premium: –25 bps cap rate vs non-certified, 2025 — [Source: Savills].
Loan Performance. ESG retrofits require $2–5 psf annual reserves, altering DSCR for older stock. Stabilized assets with certifications face smoother refinancing; weak NOI properties may struggle to secure capital.
Demand Dynamics. AI-driven absorption accelerates in data centers, while office leasing narrows to prime/luxury product. Retail in secondary markets remains weak, shifting tenant power.
Asset Strategies. Integrate ESG into pro formas early—embed retrofit tranches to avoid stranded yield. Prioritize pipeline pivots to operational CRE: healthcare, senior housing, logistics.
Capital Markets. Green certification lowers exit yields ~25 bps, tightening spread vs. USTs. Conduit lenders and cross-border investors price ESG compliance into loan structure.
Global flows stable but reweighted.
AI/data centers and ESG-certified offices favored.
Non-green assets risk higher financing costs.
Cross-border allocations bypass U.S. secondary retail.
🛠 Operator’s Lens
Refi. Factor retrofit reserves into DSCR; certifications improve rate execution.
Value-Add. Climate capex contingency: $2–5 psf annually.
Development. Embed ESG features upfront to capture 25 bps premium.
Lender POV. Banks/CMBS pricing ESG compliance as positive credit factor; stranded stock penalized.
EU/US climate disclosure mandates expand by 2026.
AI buildouts drive land/rent competition in U.S. Midwest and South.
Expect capital rotation toward operational CRE (senior living, healthcare).
Savills — Global Real Estate Outlook H1 2025 (Oct 2025). Green Street — ESG Premium in Global CRE Pricing (2025).
