Private equity’s longstanding buy-fix-sell strategy in real estate is under mounting pressure as geopolitical uncertainty, interest rate volatility, and slow transaction markets create a perfect storm for the sector. A sharp drop in deal volume, combined with weak fundraising and lingering post-pandemic sluggishness, is forcing firms to recalibrate strategies or even pivot away from property altogether.

Fundraising for Europe-focused private real estate funds fell 46% year-over-year in 2024, and investment volumes remain well below peak levels. The decline in exits is limiting firms’ ability to raise fresh capital, while capital already committed sits idle, waiting for repriced opportunities that haven’t materialized at the scale seen in previous cycles.

Despite this, many see cautious optimism ahead. Lower interest rates and easing inflation could reignite the market, and sectors like logistics, multifamily, student housing, and retail are attracting private equity attention. Savills and CBRE point to European markets—particularly the UK, Netherlands, and Spain—as emerging safe havens amid U.S. political and economic uncertainty.

Still, investors are shifting expectations. Returns may take longer, and managers must work harder to justify them. As CBRE's Chris Brett notes, “durable income” assets are now the prize, and while disruption remains a given, repricing across key sectors is slowly resetting the game board for private equity’s next real estate chapter.