2025 Mid-Year Real Estate Market Update

This document is a mid-year update for 2025 focusing on the commercial real estate (CRE) market and macroeconomic environment. It outlines the current views and opinions of Principal Real Estate regarding market dynamics influenced by policy and geopolitical shifts. The update discusses how these factors have created a risk-off environment for investors, while also noting that CRE is in a comparatively strong position. It highlights the resilience of U.S. publicly listed REITs and the healthy aggregate occupancy rates. The document details expectations for total returns in the U.S. and Europe, emphasizing the importance of property and market selection in driving returns. It also addresses the economic outlook, including the impact of U.S. tariffs on global trade and potential recession risks. The summary includes insights into the Federal Reserve's interest rate policies and fiscal spending in Europe, which may influence growth in the coming years.