PIMCO real estate outlook: resilience in the face of economic uncertainty

PIMCO has released its latest Real Estate Outlook, Bend, Not Break: Investing in Real Estate Amid Economic Uncertainty, which examines the key opportunities and risks shaping today’s real estate markets and those on the horizon. The report is authored by John Murray, François Trausch, Russell Gannaway, and Kirill Zavodov.

Some key elements of the report can be seen below:

Key takeaways include:

· The commercial real estate landscape in 2025 is shaped by structural uncertainty driven by geopolitical tensions, persistent inflation, and an unpredictable interest rate path.  

· Traditional approaches – anchored in broad sector allocations and momentum-driven strategies – are proving insufficient in today’s environment.  

· In an increasingly uncertain environment, we believe investors should be more selective, prioritizing investments that can offer durable income and aim to perform even in flat or faltering markets. We see sectors such as digital infrastructure, multifamily housing, student accommodation, logistics, and necessity-based retail as relatively more resilient today. 

Until recently, commercial real estate appeared poised for a long-awaited rebound. However, 2025 has revealed a new reality: Uncertainty has become structural. Trade tensions, inflation, recession risks, and interest rate volatility have unsettled markets and slowed decision-making. Traditional strategies – broad, momentum-driven approaches, cap rate compression, rent growth – no longer provide a reliable foundation. A disciplined investment process, grounded in local insight and operational excellence, matters more than ever.

PIMCO’s recent Secular Outlook, “The Fragmentation Era,” depicts a world in flux, where shifting trade and security alliances create uneven regional risks. Geopolitical tensions and tariffs dominate in Asia, especially China, which is shifting to a lower growth path amid rising debt and worsening demographics. In the U.S., key headwinds include stubborn inflation, policy uncertainty, and political volatility. Europe contends with high energy costs and regulatory shifts, but rising defense and infrastructure spending may provide a tailwind.

Given diverse risks across sectors and regions, traditional return drivers have become less reliable, particularly in an environment of negative leverage. In our view, resilient income and robust cash yields increasingly require local insight and active management with expertise in equity, development, debt structuring, and complex restructurings. Investments should aim to perform even in flat or faltering markets.