The REIT World Splits In Two

Premium Flagship Update

The easy narrative of a global real estate recovery did not survive March.

Through the first two months of 2026, real estate was rallying across regions. Asia was leading. Europe was participating. North America was along for the ride. It looked, briefly, like the long-awaited global REIT cycle had finally arrived.

March ended that conversation.

The FTSE EPRA Nareit Developed Index returned roughly 1.3% for the full first quarter of 2026. That headline number conceals what actually happened underneath it. Asia fell 13.5% in March alone. Europe fell 15.9%. North America declined 5.8%. The full quarter tells the same story: North America posted positive 4.7% year-to-date returns, while Developed Asia sits at negative 3.9% and Developed Europe at negative 6.2%.

That 11-point spread between North America and Europe is not noise. That is a regime change in how global real estate capital is being priced.

The answer is structural, not accidental. North American REITs carry more balanced sector exposure than their international counterparts. Asia's listed real estate market is roughly 68% concentrated in diversified property. Europe leans heavily into fewer sectors as well. When markets turned risk-off in March, concentration risk showed up exactly on schedule.

North America had diversification across industrial, residential, data infrastructure, healthcare, and retail sub-sectors. That breadth became armor. International markets discovered the hard way that concentration works beautifully in a rally and punishes you severely in a reversal.

The 2025 cycle story had Asia and Europe outperforming while North America lagged. The 2026 story has flipped that completely. This is not a gradual leadership rotation. It is a violent one. Investors who built positions in international listed real estate expecting a continuation of 2025 trends are now sitting on significant drawdowns with no obvious near-term catalyst for reversal.

North America is the defensive core of global listed real estate right now. International exposure has become a tactical allocation, not a passive one. Size your positions accordingly.

The Colliers U.S. National Office Outlook for Q1 2026 confirms what this letter has argued for two years: office is not in free fall. It is bifurcating into an increasingly narrow set of winners and a broad pool of assets that will never fully recover.

The macro picture has improved materially. Demand exceeded new supply for 3 consecutive quarters. Net absorption turned positive and has stayed there, with 6.2 million square feet absorbed in the first quarter alone and more than 23 million square feet over the trailing 12 months. Vacancy edged down to 18.2%, the third consecutive quarterly decline. The market has almost certainly passed its cyclical peak in oversupply.

Do not mistake improvement for a broad recovery. It is not.

Growth is concentrated in a handful of markets. Manhattan and San Francisco are leading absorption. San Francisco is being driven specifically by artificial intelligence leasing activity from technology tenants. The old coastal office hubs that got hit hardest during the pandemic are now recovering fastest because they sit in the talent markets that matter most.