Has Real Estate Emerged From the Bottom of the Cycle?

Challenging – and often volatile – market conditions have created a difficult capital raising environment for the $3.8 trillion real estate fund industry[1], but there are tentative signs a recovery is underway.

Despite these early tailwinds, competition for investor allocations is still at an all-time high, so managers need more than just a strong return profile to secure mandates.

If fund managers are serious about growing their AUM share, then they must double down on their digital strategies, as JTC explains.

Over the wobble, now real estate goes into recovery mode

The global real estate market is slowly returning to health after a period punctuated by the Pandemic, complex geopolitics, rising inflation, and unpredictable interest rate movements.

It has been five years since Covid rattled commercial real estate, but the situation is beginning to stabilise as cities rebound, e.g. as WFH policies are pared back by companies; consumer behaviour normalises, e.g. online shopping growth trajectory is returning to pre-pandemic levels; and the experience economy, e.g. retail, cultural institutions, hotels, etc, continues to expand.[2]

Whilst geopolitical tensions are still putting a strain on real estate markets, monetary policy easing is creating more favourable financing conditions, which has sparked an increase in deal value. According to McKinsey, global real estate deal value grew in 2024 for the first time in three years, rising 11% to $707 billion, up from $634 billion in 2023.[3]

Simon Todd, Global Head of Real Estate, said there are other reasons to be optimistic about real estate’s future.

“The soaring demand for data centres – fuelled by the Artificial Intelligence (AI) boom – could be a part in the growth of real estate over the next few years. In fact, data centres were the most popular property type for sector specific real estate funds in 1H 2025, a new first, and they even overtook the more traditional residential and industrial segments,” said Simon[4].

Elsewhere, although there has been a degree of resistance towards Environment, Social, Governance (ESG) in some quarters recently, sustainable retrofitting of commercial buildings continues to accelerate as many companies try to meet their various net zero obligations.

“At same time, – and across Europe in particular – government spending on infrastructure and defence is picking up momentum – again creating further growth opportunities for real estate,” adds Mariana Enevoldsen, Client Services Director – Fund Services.

Investors dip their toes into real estate again…

As the fundamentals underpinning real estate gradually improve, so too is performance and capital flows.

Performance across both closed and open-ended real estate funds over the last 18 months has been mixed at best, although certain sectors, e.g. manufactured housing, senior housing, data centres, have all done well. [5] More recent data from the Global Real Estate Fund Index (GREFI) All Fund Index indicates managers overall are in positive territory for Q1 2025, with returns of 0.92%.[6]

These marginal gains are translating into investor flows.

While in 2024, the total capital raised by real estate managers was down year-on-year, the situation is now looking a bit better. According to the PERE Fundraising Report H1 2025, real estate managers have so far accumulated $110.54 billion in the first half of 2025, an increase from 2024 when firms had raised at that same stage $95.19 billion.[7]

“Investors are once again returning to real estate funds after a prolonged absence period. For many allocators, the top real estate funds offer diversification and attractive returns but at lower volatility. However, it is still a buyers’ market and competition for client assets is intense. If managers want to win new mandates, then they will need to go the extra mile,” said Mariana.

Giving the clients what they want

When making a capital allocation, strong performance is a key criterium for manager selection, but it is not the only determining factor for investors.

“While positive returns are non-negotiable, investors will fail managers on due diligence- if other areas of their business are not up to their high standards. This applies to operations and risk management, but also technology. In today’s digital world, investors want everything to be seamless, from the moment they are onboarded, right through to ongoing investor reporting,” said Simon.

He added: “Whereas a lot of the financial services industry, e.g., retail banking, has transformed itself digitally, many real estate managers are still heavily dependent on legacy technology platforms and manual processes. Without a digital edge, managers are at risk of missing out on investments, especially as the key decision-makers at allocators get progressively younger.”

In practice, this means eliminating manual intensive client onboarding processes and making them entirely digital, e.g. KYC and AML, whilst also doing away with analogue investor reporting.

“Sending a monthly or quarterly email outlining information about portfolio performance and risk to clients was perfectly acceptable until the mid 2010s. Now, investors want this data sent directly – and digitally – to their phones or tablets or delivered through APIs in real-time. Those managers which upgrade their reporting capabilities will ultimately reap the rewards in this tough capital raising environment,” said Mariana.

How JTC can help

To make a success of their digital transition, managers will need to lean heavily on their service providers.

As a leading provider, JTC is well-positioned to help managers with their digital leap. JTC provides real estate fund administration and operational services for investors worldwide, ensuring efficiency, compliance, and seamless management across diverse property portfolios and investment structures. Through its best-in-class fund and corporate administration, accounting and reporting services, JTC can provide real estate managers with the support, tools and solutions needed to digitalise their operations.

“Investors want a truly digital experience. Even if a manager is delivering top quartile performance, so competitive is the market nowadays that investors will look for alternative options if their technology processes are not up to scratch. It is now more important than ever that managers upgrade their technology systems so they can meet the growing digital expectations of both existing and prospective investors,” concludes Simon.

[1] ANREV – June 4, 2025 – ANREV Fund Manager Survey 2025

[2] Cushman & Wakefield – April 2, 2025 – Commercial real estate in a post-pandemic world: Five years later

[3] McKinsey – May 20, 2025 – Global Private Markets Report 2025: Braced for shifting weather

[4] PERE – Fundraising Report H1 2025

[5] McKinsey – May 20, 2025 – Global Private Markets Report 2025: Braced for shifting weather

[6] INREV – June 17, 2025 – Global Real estate maintained positive performance of 0.92% in Q1 2025

[7] PERE – Fundraising Report H1 2025