Early in January, the Los Angeles wildfires dominated global headlines, becoming the most destructive in the city’s history and setting the tone for a year in which extreme weather events were a constant theme. This reinforced the urgency of climate resilience in real estate. Rising insurance and operational costs led occupiers to seek out adapted real estate in more resilient locations, while investors increasingly factored climate exposure into their decision-making.
On the geopolitical front, tariff announcements from the new US administration created uncertainty, contributing to a more subdued global economic environment than first anticipated. With fiscal loosening arriving later and slower than forecast, this was particularly felt in global capital markets. At the sector level, it weighed on the industrial and logistics sectors in the US, where many adopted a wait‑and‑see approach. While economic conditions are set to not be markedly different in 2026, we’re nonetheless anticipating a steady improvement in investment.
Occupier markets showed resilience. In the office sector, the flight to best in class and a lack of stock drove prime office rents to new heights, while leasing volumes recovered. Constrained development markets saw elevated financing costs, building material price inflation, and skills shortages drag on delivery. These were pressures felt across all sectors, including residential, where affordability challenges intensified worldwide. These trends are likely to continue this year.