Following a turbulent period of global repricing, the real estate market is entering what UBS describe in their recent 2025/26 alternatives report The Red Thread publication as a “generational buying opportunity”. With commercial property values having declined by 20% in the US and 16% in Europe since late 2022, a new landscape is emerging, one where patient, well-capitalised investors are positioned to thrive. For 2026, the key narrative will be how Islamic Middle East capital strategically navigates this reset, capitalising on structural shifts and a scarcity of new supply.
The defining trend of 2025 was the sheer force of Gulf sovereign capital acting as a stabilising, counter-cyclical force in Western markets. As many leveraged investors retreated amidst rising interest rates, Gulf funds deployed a staggering $130 billion into US assets alone, doubling their 2024 volume. This highlights a core theme from the UBS report that returns can no longer be engineered through leverage (Islamically structured or otherwise) alone. In 2026, watch for this trend to continue, with Middle Eastern Islamic investors leveraging their strong capital positions to acquire prime assets at reduced bases while others remain on the sidelines.
The era of focusing purely on trophy assets also appears to be over, with strategic allocations being made to sectors with strong, secular growth drivers. Our own experience at 90 North shows that Middle Eastern investors are increasingly targeting logistics, data infrastructure, and various residential sub-sectors, a move that directly aligns with the investment theses outlined by UBS. The UBS report notes that industrial assets have now overtaken office properties as the second-most invested sector in the Americas, driven by e-commerce and supply chain reconfiguration.
This pivot is not just about diversification; it is a calculated response to fundamental demand. The AI boom is fueling unprecedented demand for data centers, while demographic shifts are creating long-term needs in senior and multifamily housing. As one of the most active investor groups, Middle Eastern funds are at the forefront of this reallocation. For instance, Gulf buyers now account for 25% of London’s super-prime residential market, often acquiring larger properties as they capitalise on market conditions.
Looking ahead, the most significant tailwind for real estate in 2026 will be a dramatic drop in new supply. The UBS report emphasises that higher construction and financing costs are constraining development pipelines across almost all sectors. Retail construction is near historic lows, and the pipeline for senior housing is at its lowest point since 2013. This supply-side scarcity creates a powerful basis for rental income growth in existing, high-quality assets.
This environment elevates the importance of operational excellence. With leverage-driven returns diminished, value creation will come from hands-on asset management: upgrading energy performance, amenitising spaces and reducing vacancy. For Islamic investors, this presents an opportunity to not only acquire assets at a favourable point in the cycle but also to generate alpha through a superior operational strategy. As we move through 2026, the most successful investors will be those who combine the strategic acquisition of well-located assets with the operational expertise of an investment manager that can future-proof their assets in a market that is being fundamentally reshaped.
Written by Philip Churchill, first published in Islamic Finance News Volume 23, Issue 05 dated 4th February 2026.