Despite these challenges, there are encouraging signs for global real estate in the equity and debt markets. With inflationary pressures stabilizing and central banks gradually shifting to more accommodative monetary policy, equity and debt are better poised to come off the sidelines. JLL’s 2024 Global Capital Markets Outlook estimates that over $400 billion in “dry powder” stood ready at the end of 2023,2 positioning institutional investors to re-engage the market, including in higher-yielding and value-add sectors of real estate. Balancing the improving investment outlook, challenges in the cost and availability of debt continue to weigh on capital markets. Even as short-term rates ease, high financing costs pose significant barriers. In some instances, negative leverage has emerged, where rental yields no longer exceed financing costs, prompting institutional investors to pursue higher- return strategies or consider flexible capital structures to sustain returns. This recalibration is echoed by a more selective approach from lenders, who are increasingly cautious, requiring reduced loan-to-value (LTV) ratios and stringent debt-service coverage. This shift in lender priorities is directly impacting capital flows, as lenders favour low-risk, high-quality assets that can withstand economic volatility. Private credit has emerged as a vital component in bridging capital gaps in real estate financing, particularly in areas where traditional lending remains constrained. Debt funds and private credit vehicles are increasingly significant, including in Asia-Pacific, where they are attracting global capital in search of diversification. As private credit expands across the capital stack with structures like mezzanine financing, preferred equity and distressed debt, it is providing investors with greater flexibility while simultaneously supporting market liquidity and stability. The growth of private credit reflects a broader evolution in real estate capital markets, offering innovative financing solutions that help sustain investment momentum and underpin market recovery across various global markets. Price discovery remains an ongoing challenge, particularly for the office market, where the limited volume of recent transactions has made it difficult to determine accurate market values. This challenge is most pronounced in markets like New York and San Francisco, where hybrid work arrangements have disrupted traditional office demand. Furthermore, valuation gaps are apparent between public and private real estate markets, where liquidity and valuation cycles diverge. Public real estate investment trusts (REITs), which internalize market sentiment more observably, often experience immediate and volatile price adjustments compared to private market assets, which adjust more slowly due to infrequent trades and long-term capital commitments. As transaction volumes gradually increase, these valuation discrepancies are expected to narrow, although the pace of alignment will vary by asset class and region.$400+ billion in “dry powder” stood ready at the end of 2023. US listed REIT returns versus private commercial real estate returns (cumulative total) FIGURE 5 -50%-10% -30%10%50% Listed REITs1Private real estate2Difference-20% -40%20%30%40% 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24TD0%18.79.3%28.0% Note: 1. Listed REITs are often a leading indicator for private commercial real estate. Listed real estate bottomed in 2023 while private was still climbing. Starting in late 2023, listed began recovering while private began hitting its trough. 2. The NCREIF Fund Index – Open End Diversified Core Equity (NFI-ODCE), a commonly referenced benchmark for private real estate that tracks 25 open-end funds owning core commercial real estate, has declined for six straight quarters. Source: NCREIF, Bloomberg, Cohen & Steers. Reimagining Real Estate: A Framework for the Future 14

Reimagining Real Estate 2024