INTRODUCTION Contributed by: John Sullivan and Michael Haworth, DLA Piper LLP
Sectors Office
ing that while there is significant tenant demand for newly constructed Class A, amenity-rich office build - ings, office buildings that are older or of lesser quality continue to struggle. Living Apollo believes that housing is one of the most power - ful, long-term investment themes in global real estate. Consistent with this sentiment, global transaction vol - ume for the living sector in 2025 was USD240 billion – a 24% increase over the prior year. The US continues to be the dominant market in this sector, accounting for two-thirds of this investment, with 31% in EMEA and the remaining approximately 3% in Asia Pacific. Further growth is expected this year on the back of improving debt availability in major markets, including the US and UK. Fundraising activity targeting living growth markets in Europe and Asia Pacific has also been robust, leading to a rising tide of capital targeting the sector glob - ally. Research by Hines shows that, particularly in developed economies, 80% of households showed momentum for renting rather than buying, evidencing a potential long-term tailwind with respect to for-rent housing. Retail Retail fundamentals continue to be resilient across regions. In the US, absorption rose again in the fourth quarter of last year, signalling an ongoing recovery as store opening announcements outpaced closures. Of the four major property sectors, retail was the top performer in the NCREIF index from Q3 2023 through Q3 2025. In Europe and higher-growth or tourism- oriented economies in Asia Pacific, retailer demand continues to be healthy for premium central space, and 50% of high street retail and shopping centres have recorded positive year-over-year rent growth as of Q3 of last year. Logistics/industrial Logistics and industrial markets that are closely tied to global trade are being heavily influenced by mac - roeconomic conditions and trade policies. Unpredict - able tariff rates have made it difficult for many tenants to make long-term leasing decisions. That said, in a survey by Deloitte of more than 850 CRE executives
Global office leasing activity rose in the fourth quarter of 2025 on an annual basis for the ninth consecutive quarter, with volumes over the full year increasing to their highest levels since the pandemic. Gateway mar - kets and larger deals drove leasing in North America, and leasing activity also rose in Asia Pacific, whereas longer deal timelines in Europe contributed to a mar - ginal slowing. The global vacancy rate continued to decline after peaking in mid-2025. Asia continues to lead the recovery in the office sec - tor, with 2025 seeing a 25% year-over-year demand increase. There are, however, significant regional dis - parities in this recovery. For example, in Japan, New Zealand, Singapore and South Korea, office vacancy was a low 4%, whereas the office vacancy rate in Aus - tralia was more than 15%. In Europe, regulatory constraints, combined with a limited amount of available land, result in a significant supply constraint on the development of new office buildings in many city centres. New office construc - tion starts in Europe have fallen more than 80% from their cyclical peak, and are at the lowest level in over a decade. The impact of working from home in Europe has been less significant than in the US; as in the US, tenants prefer newly constructed Class A, amenity- rich office buildings. CBRE’s prime office rent index for Europe increased by 7% year-over-year, reflect - ing continued demand for the limited availability of prime office space. Prime office rents grew quarter- over-quarter in 13 of the 32 major European markets tracked by CBRE, with 25 of them recording year- over-year rent growth. In the Americas, 12 of the 17 major office markets tracked by CBRE had year-over-year increases in prime office asking rents in Q4. However, this recov - ery is, in many ways, a tale of two markets. Prime office buildings in the US have reported 69 million sq ft of positive net absorption since the first quarter of 2020, compared with negative 155 million sq ft in non-prime US office buildings. The 14% prime office vacancy rate is 6 percentage points below the non- prime average, which is the largest spread between prime and non-prime vacancy rates on record, show -
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