New Moore Global research reveals real estate at an inflection point: markedly more upbeat about the future than many core sectors of the world economy yet wrestling with concerns about the impact of higher interest rates on the financial ecosystem.
Higher rates are currently being implemented or flagged across the G7, with Canada the outlier holding firm for now. Meanwhile, China’s central bank has been cutting rates to tackle a prolonged domestic property downturn.
If interest rates stay higher for longer, as many economists now predict, this will impact developers as they rely heavily on external finance. In terms of property demand, borrowing costs are a key factor in determining the viability of a project.
Some 33% of property companies surveyed by the Centre for Economics and Business Research (Cebr) for Moore Global highlighted higher interest rates as their number one concern.
Two-thirds of businesses reported cost increases over the past year compared to the previous 12 months, in contrast to 14% that reported a decrease.
Looking ahead, those pressures are expected to persist, with almost 70% of businesses expecting cost increases – the main drivers being interest rates and financing. Increases in raw materials and energy also weighed on their minds.
Fear of higher rates is mirrored in other capital-intensive industries but further research into the property sector by Cebr found fluctuations in foreign exchange rates affecting borrowing costs were as much a worry as actual rates.
Meanwhile, real estate and construction borrowers find the requirement from banks for more evidence of long-term business resilience or sustainability more onerous than the average across all sectors.
Almost 30% highlighted cashflow difficulties making it harder to service debt as a major concern, against the survey average of 25%.
Ironically, more respondents in banking and finance were worried about the complexity and length of the loan application process than in real estate.
There has been a major shift on environmental, social and governance (ESG). Five years ago, pressure on the property sector in this area was intense but, today, the issue of banks requiring more evidence of ESG and responsible business practices has dropped down the list of concerns – only 23% of respondents recorded it as a challenge against the global average of 27%.
The picture, then, is of a sector more confident than its peers on almost every front bar one: the cost of finance.
Property is among the most interest-rate-sensitive businesses in the economy. A change in the cost or availability of finance can therefore determine whether a scheme gets built, whether an investor can refinance it and, ultimately, what a building is worth.
The financial drag
There is plenty of evidence of interest rates and rising construction costs creating a drag on development.
NSI, a listed Dutch office landlord, cancelled its Well House development in Amsterdam’s Zuidas business district in June 2026, taking a €9.6m non-cash impairment. The company said an updated feasibility review showed the project no longer met its investment criteria — rental demand for sustainable office space remained strong, but the rise in construction costs forced NSI to walk away.
In August, Cologne-based developer Pandion AG filed for insolvency in self-administration in early after a crucial funding component unexpectedly failed to materialise and forced the group miss an interest payment on a €45 million corporate bond. The group had been struggling with
A more selective market
The latest global outlook from the Urban Land Institute confirms the general optimism of Moore Global’s research. It says liquidity is returning to North America, Europe and Asia-Pacific. Valuations have adjusted and transaction volumes recovered in 2025.
However, it notes capital allocation is becoming more nuanced. With more expensive money required to fund projects, investors are more focused on the underlying economics of a project and where they see durable demand.
Data centres are a well-publicised example but logistics, infrastructure-linked real estate, student accommodation, senior living and selected residential markets are also attracting capital.
This is helping private credit to expand. Debt funds, institutional investors, family offices and specialist lenders are filling some of the space left by banks. Family offices, high net worth individuals and private equity funds are becoming increasingly important sources of capital.
However, private lenders generally demand higher returns or greater protection. Developers may have to contribute more equity and accept tighter covenants.
The irony is that real estate may have more sources of capital than it did a decade ago while finding finance more difficult.
Thrive Index for real estate
Moore Global created its Thrive Index to gauge the mood among 2,400 mid-market companies spanning more than 30 sectors and countries.
It is a unique research project that combines the actual experience of leaders of mid-market companies over the past year with their confidence about the future on key measures that are crucial to success.
It represents the balance of positive to negative scores on five key pillars: general business sentiment, revenue, costs, the labour market and investment.
The latest Index score is unchanged from +35.1 recorded in 2025 – but real estate and construction recorded an overall Index score slightly above the global average, at +38.2.
Overall, firms remain upbeat on balance about future investment intentions, with 62% planning to increase spending levels compared to last year.
