But according to the international real estate advisor, activity could see a robust rebound, with the pending deals data showing a 18% year-on-year rise in deals in Q2, assuming the market consensus is right on a relatively swift de-escalation of events in the Middle East.
Savills says that a strong pipeline of transactions is implying activity is being delayed rather than destroyed, echoing the pattern seen in global real estate markets following the 'Liberation Day' tariff shock of last year, where transactional weakness in H1 2025 was replaced by strength in the second half.
According to Savills, a swift de-escalation of geo-political tension will ensure little change to real estate's underlying fundamentals. It expects pricing to hold firm, despite tight risk premiums, a higher risk-free rate of return, and plenty of liquidity to remain in debt capital markets. Meanwhile, a constrained development pipeline will continue to provide an important anchor supporting rental growth, with heightened uncertainty, increased financing costs, and rising energy-linked construction costs further undermining development viability. This means that any near-term softness in the outlook for rental growth should give way to renewed supply-side tightness in the medium term. Crucially, it says, in the aftermath of 'Liberation Day', the signing of a series of bilateral trade agreements removed the most negative of downside risks and provided a more stable status-quo for investors to again underwrite new deals.
Rasheed Hassan, Head of Global Cross Border Investment, Savills, says: "2025 demonstrated a level of resilience in real estate activity, with investors showing a greater proclivity to trade through the cycle after several years of elevated volatility. While recent geopolitical events have caused a slowdown in transactions this year, we expect a similar dynamic to occur. Investors seem to be demonstrating a greater desire and propensity to remain active during uncertainty: they recognise that long-term, real estate's fundamentals remain sound and, crucially, it diversifies portfolios, so to a point they are 'getting on with it' and continue to trade."
Savills says that regionally Q1 performance has been asymmetric. In the US, commercial real estate rebounded sharply across most sectors and markets to push total transaction activity to US$120 billion in Q1, up 19% year-on-year and the strongest start to a year since 2022. The market remains somewhat resilient to the conflict in the Middle East for now; investment in March was up 36% on the year, outperforming both January and February. The resilience in the transactional data is reinforced by signals on pricing. Prime yields have broadly stabilised over the last year, and little change is expected over the next 12 months. The office sector saw the clearest improvement in US capital markets in Q1, with total office investment surpassing US$20 billion, up 40% on the year, and liquidity returning more convincingly than in recent quarters. This was the fourth consecutive quarter of double-digit growth, as investors continue to re-engage with a sector showing a meaningful improvement in fundamentals.
In the UK and Europe, real estate investment reached approximately €48 billion (US$56 billion) in Q1 2026, down 5% on the year. The quarter was characterised by slower processes, tighter underwriting and a higher bar for conviction. Sentiment remained cautious, but transactions continued, with longer decision-making and more late-stage renegotiations defining the market. Savills says the main constraint remains the shift in interest rate expectations, which have softened buyer confidence and slowed momentum, but the fundamentals have improved: pricing appears to have found a floor, total returns are back in positive territory and limited development activity is supporting rental growth across most sectors. The living sectors remained dominant in Q1, with total investment in care homes more than doubling in the first quarter, relative to Q1 2025, while PBSA investment rose by 84% year-on-year, and multifamily by 20%. Geographically, dispersion was pronounced: activity across core markets continued to underperform expectations, with France down 36% year-on-year, the UK down 11% and Germany down 5%, albeit that this largely reflected delays in executing larger transactions, rather than a material withdrawal of capital. In contrast, momentum shifted decisively towards more peripheral and higher growth markets, with Finland, Poland, and Spain each recording annual increases of more than 50%.
Total investment of US$50bn in APAC markets in Q1 2026 was around 19% up year-on-year (16% in fixed exchange rates), representing the best start to a year since 2022 and the third consecutive quarter reporting a double-digit rise. Growth was broad-based, evident across both individual asset sales and larger portfolio deals, with all core sectors posting strong growth, with the exception of living, which in APAC has seen activity sit outside traditional transaction data, with capital increasingly directed toward development projects and asset conversion strategies instead. Savills says that cross-border investors have been strong net-buyers in APAC in 2026 so far, being the buyers of 40% of transactions year-to-date, compared with a longer-term average of 30%. There were several major office deals in Q1, driving regional office investment up 26% year-on-year in Q1 2026, driven by larger institutional transactions, with deal flow above US$200 million increasing 58% year-on-year, with Singapore, Seoul and Tokyo posting strong growth.
Investment activity across the industrial and logistics sector has also continued its recovery, with Q1 investment riding by 38% year-on-year, albeit off a low base, while the tech and AI sectors are driving an explosion of activity in the data centre space. Total announced project value across the APAC region was close to US$100bn in 2025, up from around US$65bn the year before. The geographic split is also telling, with South East Asia accounting for roughly 40% of activity and South Asia a further 15%.
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