The 2025 global real estate landscape is being tugged in opposite directions. On one side, housing markets are dealing with tight supply and renewed price growth. On the other, large parts of commercial real estate are still digesting high vacancies and an unforgiving refinancing calendar. Listed property and REITs sit in between, repricing real assets in real time.
Market strategist Merritt Dawsley treats all of this as a single, interconnected cycle. With training in finance and economics at leading U.S. business schools and a background that spans both fundamental and technical analysis, he has spent years observing how equities, bonds, commodities, digital assets and real estate react to the same macro forces. In 2025, his attention is squarely on how property markets absorb higher-for-longer interest rates and a persistent affordability squeeze.
One Cycle, Two Tensions
For Dawsley, the 2025 real estate cycle can be summarised as a fragile balance:
- Income and rents have held up. Labour markets remain reasonably solid in many economies, and vacancy in core residential segments is low.
- The cost of capital is no longer benign. Even as central banks edge away from peak policy rates, financing costs remain structurally higher than in the 2010s.
Global data show nominal house prices climbing again in many countries. Strip out inflation, and the real gains are modest; in many cities, affordability continues to erode. Fitch Ratings still expects broad home-price growth and low mortgage arrears into the second half of 2025, citing strong employment and constrained supply despite slower GDP growth.
Commercial real estate (CRE) tells a different story. Institutions such as the IMF highlight ongoing vulnerabilities—especially in office-heavy markets where high leverage meets weaker cash flows and elevated rates. That mix creates pressure points for borrowers and lenders alike.
To Dawsley, this isn’t a classic boom-bust narrative. It is a two-speed market:
residential and selected niches are moving forward, while parts of CRE remain in a multi-year repair process.
Housing: Price Growth Meets Household Strain
Dawsley’s starting point on housing is simple: headlines about “rising prices” don’t capture the experience of households.
Research across major markets points to a similar pattern:
- Nominal house prices have resumed moderate growth in many regions, backed by tight supply and slightly more stable, or gently declining, mortgage rates.
- Affordability indicators—price-to-income and price-to-rent ratios—remain stretched in a number of large cities.
Two examples illustrate how uneven this housing market is:
- Germany. After a sharp correction from 2022 peaks, German home prices are now projected to rise by roughly 3.5% in 2025, with similar growth expected in 2026–2027. Over time, this pace outstrips inflation and rebuilds pressure on first-time buyers.
- London. Average prices have slipped to their lowest level in nearly two years, even as the broader UK still records positive annual growth. Analysts point to lofty starting valuations, elevated mortgage costs and pending tax changes on higher-priced homes as key drivers.
From these and other markets, Dawsley draws three broad conclusions about the global housing market in 2025:
- Supply and demographics set the floor. Limited new construction and structural demand in many countries prevent deep, prolonged price corrections.
- Rate sensitivity has returned. When valuations and debt loads are high, even modest changes in mortgage rates bite quickly, especially in premium segments.
- Affordability, not just prices, is the binding constraint. Whether prices are up or flat matters less than what households can realistically afford to borrow and repay.
In his models, housing is not only an asset class but also a social pressure valve. When affordability deteriorates too far, he expects political responses—from rent controls to tax reforms and subsidy schemes—that can significantly alter risk and return profiles for investors.
Commercial Real Estate: Repair, Reinvention and Refinancing Walls
While households grapple with affordability, the commercial real estate market in 2025 is still working through the aftermath of the pandemic and the interest-rate shock.
The United States offers a vivid case study:
- By mid-2025, leasing and transaction activity show tentative improvement, and rates are no longer surging higher.
- Yet office vacancy remains near record highs, particularly in older buildings and secondary locations.
- A “refinancing wall” looms: roughly $950 billion of CRE loans are due in 2025, nearly three times the 20-year average. Many owners must refinance at higher rates and lower valuations.
Global financial stability assessments from bodies like the IMF warn that, in the wrong conditions, CRE exposures could transmit stress to the financial system, especially in markets where office assets are heavily leveraged and concentrated on bank balance sheets or in certain funds.
The picture is not uniformly bleak. Dawsley emphasises that sector and geography matter more than ever:
- Logistics and industrial assets continue to benefit from e-commerce, supply-chain diversification and the need for modern distribution hubs.
- Prime segments in selected Asia-Pacific and European markets are again attracting cross-border capital, with early signs of yield compression where fundamentals have clearly turned.
In short, 2025 CRE is a patchwork:
- A tired office tower in a weak CBD with looming capex looks nothing like
- a data centre serving AI workloads,
- a modern logistics park near a major port, or
- a prime high-street asset in a supply-constrained city.
Treating them as one risk bucket, in Dawsley’s view, is a mistake.
Listed Real Estate and REITs: The Market’s Early Warning System
Listed property and REITs are where Dawsley looks for real-time feedback on the global real estate cycle.
Several trends stand out in his 2025 analysis:
- Global REITs generated strong overall returns in 2024, with health care, data centres and parts of the office sector among the notable leaders.
- By late 2024, multiple REIT sectors traded at a premium to net asset value (NAV), a sign that public markets were willing to fund them at attractive costs of capital. That, in turn, enabled some REITs to purchase assets from more constrained private owners.
From this, he draws two key inferences about the REIT market in 2025:
- Balance sheets in listed vehicles are, on average, more conservative than those of many private owners facing refinancing stress.
- Pricing adjusts quickly. Public markets re-rate sectors as soon as narratives about rates, regulation or demand shift—often well before private transaction evidence appears.
He is particularly focused on AI infrastructure and data-centre REITs. These sit at the intersection of real estate, technology and power markets, with demand driven by cloud computing and high-density workloads. The opportunity is substantial, but so are execution and valuation risks if expectations get ahead of fundamentals.
Dawsley’s Three-Lens Framework for the 2025 Global Real Estate Market
Rather than forecasting single price targets, Dawsley organises his 2025 real estate view around three coordinates that he applies across sectors and geographies.
1. Cost and Structure of Debt
The first lens is the rate and refinancing environment:
- Policy rates are off their peaks but remain well above the ultra-low levels of the previous decade.
- Credit spreads are wider than in the era of abundant liquidity.
- The CRE refinancing wall is a central risk, while housing is less exposed in the immediate term but still sensitive to mortgage-rate changes.
In his scoring framework, assets are ranked not just by yield, but by refinancing risk, leverage levels and balance-sheet resilience.
2. Quality and Durability of Cash Flows
The second lens is income:
- Residential rents remain high and are forecast to keep rising in many cities, even where sale prices have softened. For investors, that supports the appeal of rental housing; for tenants, it intensifies affordability pressure.
- In commercial property, tenant strength, lease length and asset quality are decisive. Logistics and prime retail often benefit from relatively durable cash flows, whereas generic offices with short leases and high capex needs face downgrades and tenant churn.
In this framework, the 2025 real estate cycle is less about headline cap rates and more about which income streams can survive a full rate cycle.
3. Regime and Geography
The third lens is what he calls the regime for each market or segment:
- Repair regime: stressed office markets in major Western metros that are still digesting remote work, reconfigured space demand and past overbuilding.
- Resilience regime: logistics, data centres, healthcare and residential assets in supply-constrained or structurally growing cities.
- Re-pricing regime: parts of Europe and Asia where yields are still adjusting to new rate paths and cautious cross-border capital is returning.
This simple classification helps him identify where investors are being adequately compensated for risk and where they are not.
Three Narratives for the 2025–2026 Global Real Estate Cycle
Using these three lenses, Dawsley sketches out three scenarios for the 2025–2026 period, rather than relying on a single forecast.
Scenario 1: Soft-Landing Normalisation (Base Case)
- Global growth slows but stays positive.
- Inflation continues to trend lower.
- Central banks deliver gradual rate cuts, leaving funding costs above 2010s lows but below 2023 peaks.
- Housing prices rise modestly in nominal terms; affordability improves only slowly, if at all.
In this environment:
- CRE gradually stabilises, with clearer price discovery in offices and ongoing strength in logistics and living sectors.
- REITs remain a useful vehicle to access stronger balance sheets and specific sector themes.
Scenario 2: Higher-for-Longer Surprise
- Inflation proves stickier than consensus expects.
- Rate cuts are pushed back or delivered in smaller increments.
- Long-term yields stay elevated, driving cap rates higher and compressing valuations for leveraged assets.
Under this higher-for-longer outcome:
- Highly leveraged CRE—especially weaker offices and secondary locations—is most exposed to forced sales, covenant breaches and restructurings.
- Housing markets with already fragile affordability face further price softness or extended stagnation.
Dawsley’s stance in this scenario is more defensive, with greater emphasis on balance-sheet strength, refinancing risk and asset quality.
Scenario 3: Downside Growth Shock
- Global growth slows sharply due to external shocks or policy errors.
- Central banks respond with more aggressive rate cuts.
- Government bond yields fall meaningfully as investors seek safety.
Here, the stress shifts:
- Prime, income-secure assets—core housing, logistics and some infrastructure-like segments—tend to hold up relative to the broader market.
- The weakest CRE borrowers experience rising defaults, but lower rates offer some relief to stronger owners that can refinance and selectively acquire assets from distressed sellers.
How Investors Can Use Dawsley’s 2025 Real Estate View
Dawsley does not offer individual advice, but his 2025 global real estate analysis points to a few broad disciplines that investors may consider:
- Look beyond the averages. Index-level data hide big divergences between segments and cities. 2025 is a market of micro-stories, not just global aggregates.
- Make balance-sheet strength a central filter. In a world where money costs more, leverage, debt maturity and financing flexibility are as important as location and yield.
- Watch listed markets for early signals. REIT pricing, sector rotations and equity issuance often foreshadow where private valuations are headed.
- Design strategies for multiple regimes. Portfolios should be robust not only to a soft landing, but also to a higher-for-longer path or a downside growth shock.