Can global real estate continue to build on outperformance in 2026?

Source: Trustnet

Global real estate is set to outperform US real estate for the first time since 2017, with global real estate investment trusts (REITs) up 10.4% versus US REITs up 4.5% at the end of the third quarter of 2025.

What is notable, given that US markets account for more than 60% of global real estate, is the strength of Asia Pacific, Europe, and emerging markets. Asia Pacific leads with a 27.4% gain, followed by Europe at 17.9% and emerging markets at 16.2%.

This marks a sharp contrast to recent history, when the US served as a safe haven, offering relatively solid growth while Asia faced political turmoil and Europe struggled with slow growth.

Over the past five years, US REITs returned 7% annually, while Europe and emerging markets delivered negative annual returns and Asia posted just 3.5%. Last year represented a clear reversal of those trends.

What is driving global outperformance?

Favourable valuations, improving fundamentals and a supportive macroeconomic backdrop are the key forces behind the resurgence in international markets.

Europe and Asia entered 2025 trading at deeply discounted valuations and are now set to benefit from many alternative sectors, such as data centres, storage, towers and health care, which are still maturing, creating favourable supply-demand dynamics.

Heightened external uncertainty is also prompting governments across Europe and Asia to adopt more proactive policies to stimulate domestic consumption and support economic growth.

We believe government policy in China has turned from a headwind to a tailwind. And many Asian companies are proactively taking steps to improve corporate governance and drive shareholder return.

Where do we go from here?

While uncertainty remains, such as whether Europe can sustainably lift productivity and growth, we believe global REITs are well positioned. Many countries continue to trade at significant discounts to net asset value (NAV), balance sheets remain strong and investors appear overallocated to the US, allowing further normalisation.

This is not to suggest US-listed real estate will underperform. Rather, global markets are catching up. In fact, many of the same tailwinds supporting international markets will also benefit US REITs continuing to trade at meaningful discounts to the broader equities market.

These include secular drivers such as artificial intelligence and data centres, the needs of an ageing population for senior living facilities and the evolution and re-emergence of brick-and-mortar retail.

Three sectors reshaping real estate in 2026

Data storage: The data storage and infrastructure market is expected to grow by 160% by 2034, driven by the expansion of artificial intelligence and cloud platforms. This demand is being driven by hyper-scalers such as Microsoft, Meta, Google, Amazon and Oracle, many of which continue to increase capital expenditure. These companies have signalled that next year’s spending will exceed this year’s record pace.

At the same time, limitations in power infrastructure are constraining supply across key data-centre markets. In the US, this has resulted in the strongest rent growth in a decade and vacancy rates below 3% on average.

Strong market expectations drove sector returns of 30% in 2023 and 25% in 2024, though data centres have declined 6.5% through the third quarter of 2025 as valuations rose, according to American commercial real estate services and investment firm CBRE. While supply will eventually catch up, power constraints, costs and long lead times suggest demand will exceed supply for several years.

Changing demographics: The population of Americans aged over 85 is expected to double by 2040, meaning nearly 15 million people are likely to require senior housing and care. This should translate into strong occupancy growth and pricing power as supply remains constrained.

Assisted living construction is at its lowest level in 14 years, down 25% year-on-year, while independent living supply declined 6%. Senior housing construction starts have fallen every year since 2020, including declines of 68% in 2024 and 57% in 2023.

Recent third-quarter results underscore this momentum. Assisted living occupancy rose 90 basis points quarter-on-quarter and 240 basis points year-on-year, while independent living communities posted gains of 50 basis points quarter-on-quarter and 200 basis points year-on-year.

This tightening pipeline supports pricing power. Revenue per occupied room continues to rise, particularly in skilled nursing facilities, where reimbursement growth – payments from government programmes and private insurers – reached the highest level in its 18-year history. The third quarter in 2025 saw reimbursement growth of 5.2% exceeded the previous record set in the second quarter.

Retail revolution: Retail’s outlook darkened in the 2000s as sales slowed, financing dried up after 2008 and e-commerce accelerated during the pandemic. However, reports of the death of the physical store were greatly exaggerated.

New retail shopping centre construction remains the lowest of any major property type, while retail sales have grown steadily at 3% annually despite store square footage expanding by less than 1% for more than a decade.

Strong demand is now colliding with extremely limited supply, driving high occupancy and strong rent growth for select properties. Bank of America recently reported record retail leasing for the second consecutive year.

Retailers have also adapted. Omni-channel models such as click-and-collect now dominate, with a majority of Target’s and Walmart’s online orders fulfilled from stores. Home Depot fulfils nearly half of its online orders in-store. In Europe, the click-and-collect market for grocery fulfilment is expected to grow nearly six-fold by 2033. 

In 2010, only 2% of e-commerce sales were fulfilled in stores; by the end of this year, that figure is expected to reach 34%. As customers increasingly collect orders themselves, store-based fulfilment supports both major retailers and surrounding shopping centres. We expect accelerating rent growth as strong demand meets very limited supply.

Ji Zhang is a global real estate portfolio manager at Cohen & Steers. The views expressed above should not be taken as investment advice.