Private capital leads recovery in commercial real estate as institutional investors prepare for 2026 rebound

Knight Frank’s latest Wealth Report suggests the global commercial real estate market is edging towards a clearer recovery in 2026, with institutional investors expected to bring about $144 billion back into the sector.

That return comes after several years in which private capital has dominated dealmaking. According to Knight Frank, wealthy individuals and family offices were again the largest buyers of commercial property worldwide in 2025, marking the fourth year in a row in which they outpaced institutions. Private investors deployed $464 billion last year, compared with $347 billion from institutional capital.

The report argues that the balance of power has shifted towards investors able to move quickly and tolerate more uncertainty. Knight Frank says decisions are being driven less by headlines and more by asset-level fundamentals, even as geopolitical tensions and regulatory concerns persist. Only 15% of respondents, representing $1.4 trillion in assets, said domestic politics was a major influence on their choices, while just 5% pointed to regulation and taxation.

That preference for agility has given private capital a structural advantage. With more flexible financing and faster execution, it has been able to step into markets earlier in the cycle and hold assets through volatility, while institutions have often remained more constrained.

The office market, long written off by some investors after the pandemic, is showing signs of a more durable recovery. Knight Frank’s (Y)OUR SPACE survey, which covered nearly 300 occupiers and more than 60 million square metres of space globally, found that hybrid working has stabilised and that office use is becoming more important again, particularly in financial and professional services.

Leasing activity has strengthened in major cities, where firms are competing for quality locations and, in many cases, expanding their footprint because supply remains tight. Rents are rising again in leading markets, and investors are returning to the segment with greater confidence. The data, Knight Frank says, increasingly contradicts the idea of a permanent office collapse.

Retail is also regaining appeal, helped by years of limited new development. In Australia, the sector produced a total return of 9.2% in 2025, its strongest result since 2017, buoyed by constrained supply and better tenant turnover. Knight Frank says the same pattern is visible elsewhere: where new space has been scarce, income stability has improved and pricing has become more attractive.

Europe is seeing a particularly clear revival in large transactions, especially in offices. Private investors committed $18.9 billion to European office assets over the past year, and Knight Frank now sees the sector as one of the most sought-after globally for 2026. Institutional buyers are expected to follow, focusing mainly on prime, ESG-compliant buildings in central business districts, while selectively considering secondary assets where prices have corrected sharply.

In Poland, Knight Frank says private domestic and foreign investors have moved especially quickly to capture opportunities created by strong economic growth and attractive valuations. Krzysztof Cipiur, director of capital markets at Knight Frank, said local wealth creation is already reshaping the market, with the share of Polish investors in 2025 transaction volumes reaching 18%, more than five times the long-term average.

Asia-Pacific is also seeing renewed momentum. Cross-border investment by wealthy individuals hit its highest level since 2019, with mainland China accounting for 46% of buying interest. Knight Frank says younger investors in the region are moving away from passive trophy purchases and towards active value-add strategies across offices, retail and hotels. Singaporean capital is also increasingly flowing back into the domestic market as currency volatility shapes allocation decisions.

India stands out as a more stable destination for global capital. Knight Frank notes that domestic investors now account for nearly 26% of private equity investment, up from 11% before the pandemic slowdown in foreign money. With GDP growth above 7%, easing inflation and robust demand from occupiers, both office and logistics leasing are hitting record levels, while retail is gradually recovering.

Overall, the report suggests 2026 will favour investors willing to focus on pricing, income and supply constraints rather than short-term sentiment. Even markets facing weak public perception, such as the UK, continue to draw capital, underlining the growing gap between market mood and actual investment flows. Nick Braybrook, Knight Frank’s global head of capital markets, said the sector has entered a new phase in which stabilising rates, better pricing and more predictable income are once again pulling money back in.