The biggest risk in real estate today is doing nothing

As we look at the market today, one thing is clear: volatility and geopolitical noise loom large. But the biggest risk we see for real estate is not the noise; it is sitting on the sidelines.

There will never be a risk-free moment. This is precisely why high-quality real estate matters more in portfolios in this environment. It can provide durable income, income growth, and a stabilizing anchor when day-to-day public market volatility is elevated.

In other parts of the financial market - including equities - today's elevated price-to-earnings ratios leave little room for error and create a risk to future returns. Real estate is in a different place. After a sharp correction and a slow, uneven recovery so far, we see today's lower values as setting up a meaningful tailwind for returns in the years ahead.

We manage one of the largest and most diverse real estate platforms in the world and the signals are clear to us. Two themes emerge as we consider how to deploy capital: Everyday Life and Market Momentum.

Everyday Life is our structural foundation, the needs-based real estate tied to essential, nondiscretionary demand. Market Momentum is our tactical lane, the opportunities that materialize after a significant reset and are driven by liquidity, capital structure, or sector-specific dislocation. This is not a market that is rewarding broad exposure. Returns dispersion is wide, and that makes selectivity more important than it has been in many years.

Within Everyday Life, Living remains a global cornerstone because it maps directly to the lifecycle of people and communities and the need for housing persists through cycles. In 2025, 60% of our global acquisitions and lending activity was in Living.

We continue to like multifamily, but with a much more selective lens, prioritizing markets with strong household formation and proven supply constraints. We are also pursuing new living solutions, including co-living strategies in Europe and Australia, where demand is being driven by affordability pressures and the need to use space more efficiently.

Seniors housing is a clear example of how long-term demographics are colliding with a multi-year supply gap. The wall of demand tied to aging populations is here, and we believe there is still meaningful runway ahead. Seniors housing delivered our strongest returns of any property sector globally in 2025. We believe operator selection matters enormously in this segment, because headline risk is real and outcomes can diverge quickly.

Everyday Life also includes what we think of as Urban Infrastructure, the physical and digital backbone that supports modern cities. We see opportunity in last-mile logistics that helps move goods to end users, in necessity-based retail anchored by everyday services, and in digital infrastructure that supports cloud adoption and newer AI-driven workloads. In parts of the data center market, we are seeing double-digit rental growth as demand continues to broaden.

Market Momentum reflects where we are in the cycle after several years of repricing. Values in many markets are becoming more attractive, but the recovery is uneven. We do not expect a broad-based rebound. We expect opportunities to appear market by market and sector by sector, which makes local insight and disciplined underwriting critical.

A major driver of Market Momentum today is the growing need for capital. Refinancing pressure, higher capital requirements, and more limited access to traditional financing are creating openings across the capital stack.

We see opportunities where properties require capital expenditures to remain competitive. Capex needs have risen materially, while funding has not kept pace, leaving a gap that has roughly doubled over the past decade. In parallel, conversions are becoming a more important pathway for value creation as demand shifts, including office-to-residential in select markets and, in some cases, industrial-to-digital infrastructure.

We are translating our high conviction into action in what we believe is a very compelling vintage for real estate. In this cycle, flexibility in capital deployment will distinguish the best performers. Selectivity and access to the best opportunities matter more than ever.