Commercial real estate is closing 2025 with renewed conviction after several years of rate volatility and market dislocation, according to Apollo Global Management's 2026 Real Estate Outlook. Scott Weiner, Partner and Global Head of Real Estate Credit at Apollo, writes that capital markets have reopened, banks are lending again, and transaction volumes have surpassed 2024 levels across nearly every property sector, from industrial to multifamily, retail and even office. The era of ultra-low rates is clearly behind us, and buyers and sellers have come to terms with higher base rates as the new normal. Research shows that commercial mortgage-backed securities issuance has more than tripled since 2023, while private credit markets are financing an increasing share of new deal activity.
Valuations have stabilized after finding a floor in early 2024, Weiner notes. New construction has slowed sharply, and elevated replacement costs are supporting existing values. Against a backdrop of policy uncertainty, tariffs and labor constraints, commercial real estate has demonstrated resilience. Perhaps most strikingly, AI has emerged as a new growth engine for the sector, driving one of the most capital-intensive buildouts in modern real estate history. Barclays estimates over $2.3 trillion has already been committed to data centers this year, with another $3 trillion expected through 2028. The AI buildout is not just changing how projects are financed but is poised to influence what they cost, with potential ripple effects across every property sector.
Apollo identifies three areas of opportunity for investors in 2026. The first is relative value in real estate equity versus other asset classes. With public equities trading near cyclical all-time highs and at stretched valuations, private real estate may offer compelling relative value, Weiner writes. The NCREIF ODCE Index, a benchmark of core institutional real estate funds, has now posted several consecutive quarters of positive total returns, signaling a market regaining momentum. Structural shifts are expanding access, including the inclusion of private market investments such as real estate in defined contribution and 401(k) plans, which paves the way for deeper liquidity and stronger investment flows.
The second opportunity is in European real estate credit, where a fragmented lending market is creating openings for global platforms. With the ECB's deposit rate near 2% and valuations having reset, deal activity is accelerating. Yet the region still lacks an integrated securitization market, limiting liquidity and making it harder to recycle capital, and many traditional lenders remain cautious. For global platforms with the scale and structuring capabilities to operate across borders, this environment can offer attractive spreads. Breadth of capabilities and reliability of execution are increasingly what allow managers to capture these opportunities and to lend in ways smaller institutions cannot.
Housing remains one of the most powerful long-term investment themes in global real estate, according to Apollo. The US is expected to face a shortfall of roughly four million homes by 2029. Meanwhile, Europe's affordability crisis continues amid chronic underbuilding. New housing starts have fallen sharply due to elevated financing costs and regulatory bottlenecks, tightening supply through at least 2026. At the same time, the cost of owning a home has nearly doubled relative to renting. This widening gap is fueling sustained demand for multifamily, manufactured, student and senior housing, along with build-to-rent models.
The structural themes that look durable in a market rebound are almost never obvious in the data the day before, family office advisor Jaf Glazer has cautioned.
Weiner writes that housing is not just cyclical but structural. Limited supply, demographic tailwinds and resilient income fundamentals can make this one of the most durable areas in real estate credit and equity. Seizing these opportunities will require more than capital, he argues. It will demand adaptability and deep operational expertise. First is the importance of vertically integrated managers, those with in-house operating platforms to drive alpha generation at the property level. Firms that integrate high-touch asset and property management will be better positioned to respond to market shifts and capture incremental value others miss.
Scale matters, Weiner adds. The next wave of real estate credit, financing AI infrastructure, housing development and sustainability-linked projects, will require capital that can move with speed and precision. Managers with established platforms, a global presence, stable capital bases and strong relationships with borrowers are best positioned to meet this demand responsibly. Apollo sees 2026 as the convergence of cyclical recovery and structural transformation. Capital markets are open, valuations have reset and foundational sectors like housing are underpinned by enduring demand. Meanwhile, technology and tighter investment discipline are reshaping the sector.