The commercial real estate capital markets have experienced significant challenges in recent years, with a historically abrupt increase in the cost of capital, reduced availability of financing and general economic uncertainty amid shifting demand for space. The impact of these factors has been felt globally, as rising borrowing costs and changing investor sentiment have created a turbulent environment for transactions and capital allocation. However, as the world enters a new phase of economic stabilization and anticipates a more favourable interest rate environment, the outlook for real estate capital markets is improving. In advancing the framework’s vision, favourable capital markets are an essential condition, as progress depends on consistently attracting private capital. 2.1 Capital markets Recent challenges: Over the past few years, global real estate capital markets have navigated through a period marked by economic instability, high inflation and geopolitical uncertainties. A primary challenge has been the rapid rise in interest rates, which has affected the cost of capital and reduced access to financing for both existing assets and new developments. To combat inflation, the Federal Reserve and other central banks around the world have implemented aggressive monetary policies, resulting in elevated borrowing costs that have put pressure on the real estate sector. Higher interest rates have increased the cost of financing, leading to lower asset valuations and a slowdown in transaction activity. These forces have fomented a challenging environment for owners and investors, compelling them to reassess asset performance, re- evaluate portfolios and recalibrate capital strategies to better align with these new market dynamics and build resilience into the capital stack. Central bank policy rates FIGURE 3 9 03612 2021 2022 2023 2024 2025Global central bank rates. Average realized and expected monetary policy rates by region (percent) Latin America Central and Eastern Europe, Middle East and Africa Asia US federal funds rateMarket expectations Source: Adrian, T., Natalucci, F. & Wu, J. (2024, 31 January). Emerging Markets Navigate Global Interest Rate Volatility. International Monetary Fund (IMF). https://www.imf.org/en/Blogs/Articles/2024/01/31/emerging-markets-navigate-global-interest-rate-volatility. Reimagining Real Estate: A Framework for the Future 12

Reimagining Real Estate 2024