For Commercial Real Estate Investment, the Iran War Is Distant — So Far

The annual MIPIM conference, a benchmark global real estate expo held in Cannes overlooking the azure Mediterranean waters edging southern France, offered some telling signs around the state of commercial real estate investment in the wake of recent conflict and instability. 

As tens of thousands of analysts, fund managers and real estate players confabbed about the state of the market from March 9 to 13, the event was quieter than it had been in past years, according to several attendees. Many Middle Eastern representatives weren’t able to attend, held back by canceled flights stemming from the war in Iran. 

“I think there’s been a general dampening effect,” said Gunnar Branson, CEO of the Association of Foreign Investors in Real Estate (AFIRE). “You could see global investors trying to see how this turns out. It certainly felt different than it did before.”

Just weeks into the rapidly shifting Iran conflict that began Feb. 28 — one that’s evolving with every tweet, Branson said — it’s impossible to gather detailed data on the impact of hostilities around the Strait of Hormuz, the all-important oil shipping channel. But there’s plenty of speculation around the inflationary impacts of a prolonged spike in energy prices and open-ended fighting. 

Investors and analysts broadly share a consensus that this will be a short conflict, causing a tapping of the brakes for deal-makers rather than an abrupt stop. This war won’t broadly shift the existing trends in foreign investment flows into U.S. property, and may prove to be a speed bump for the real estate recovery that has shaped up in recent months. Despite the feared outbreak of significant hostilities in the Persian Gulf, in real estate, pragmatism and positive momentum appear to be winning out. 

“These events are obviously playing on investors’ psyches, but, when it comes back to actual fundamentals in global real estate markets, there are still positive signs,” said Simon Chinn, vice president of research and advisory services for the Urban Land Institute. “Despite this volatility, many in the industry recognize you can’t just sit on the sidelines. Unpredictability has become the only constant now.” 

In recent months, there has been a noticeable uptick in transaction volume and overall improved sentiment in commercial real estate, buoyed by a firming up of prices. Falling interest rates, falling hedging costs and a declining dollar had created a strong backdrop for international investment in the U.S., said Alex Foshay, Newmark executive vice chairman and the head of its international capital markets group.

While total direct foreign investment in U.S. commercial real estate was $26 billion last year, a drop from $29.7 billion in 2024 and far from recent peaks (like the $95 billion invested in 2018), circumstances had teed up a return to more aggressive deal-making. The fourth quarter of 2025 saw $10 billion in such investment alone, per Newmark. Whether you’re an Australian superannuation pool, a Middle Eastern sovereign wealth fund or a German pension system, you “want to buy into the story” the U.S. is selling, Foshay said.  

“From a geopolitical standpoint, show me a country that feels safer right now,” said Branson. “We’re sort of the tallest short person in the room. And 50 percent of the institutional-quality commercial real estate is here.”

So far, many of the Middle Eastern sovereign wealth funds have been publicly silent, making few if any statements about the war and its repercussions on investment strategy, especially regarding where their capital flows. 

Foshay, who works with major Middle Eastern funds, said that in recent discussions leaders have said they’re “steadfast in their positions” and continue to pursue their 2026 investment requirements. Gulf investors have deployed over $10 billion into New York City real estate since 2020, according to Newmark data, and made additional investment in U.S. skyscrapers, student housing and offices. 

As long as the conflict is brief, the impact on capital flows — and the view of the U.S. as the best place for long-term investment — should remain largely unchanged, said Sam Chandan, founding director and professor at New York University’s Chao-Hon Chen Institute for Global Real Estate Finance. 

Chandan has one qualifier: Investors from the United States who may have been evaluating opportunities to deploy capital in the Persian Gulf region will place more emphasis in their calculus on the potential for geopolitical instability in the area. The long-sought image of places like Dubai as an international haven for capital and financial firms is a critical focus for Middle Eastern leaders, and a reputation they hope doesn’t take a hit.

For the first two months of the year, the mood within commercial real estate was decidedly upbeat. An Urban Land Institute global survey published in December picked up on improving optimism around investment opportunities in 2026, and an AFIRE survey posted in February found cross-border investors were not only excited to increase their investment in the U.S. this year, but also ranked the country as the safest business environment, despite growing skepticism. Roughly two-thirds of respondents said they didn’t foresee a wave of divestment from the U.S. anytime soon.

Data from MSCI found a 12 percent year-over-year increase in global real estate deal value in 2025, and the U.S. real estate market has “level set” in recent months, according to Jim Costello, executive director at investment adviser MSCI, finally adjusting to the post-COVID landscape and moving forward. The LightBox CRE Activity Index — which aggregates commercial listings, appraisals and other U.S. transaction data — hit 118.2 in February before the outbreak of hostilities, the highest level in the last four years. 

“We’re seeing an uptick in transactions, a deeper, more diverse buying pool, and people putting money to work deploying capital,” said Manus Clancy, head of data strategy at LightBox. “It wasn’t just opportunistic buyers. Everybody was dipping their toes in.”

However, a conflict that escalates — either becoming more intense amid existing players, or begging to entrap more countries in the region, or more seriously damaging oil infrastructure — may lead to an inflationary spiral in the U.S. that eventually causes a rise in interest rates and a reassessment in values. Newmark’s Foshay believes any conflict that runs past eight weeks will begin to raise investor concerns. And stopping that spiral may prove much more difficult. 

“Compared to U.S. tariff disputes and Liberation Day last April, what is happening at the moment is much harder to switch off,” said ULI’s Chinn.

The conflict’s impact on U.S. real estate activity can be divided into two buckets, said MSCI’s Costello: the real economy, which takes much longer to show an impact, and the financial economy. 

The latter has already seen some war-related activity in recent weeks. Both the 10-Year Treasury Index and Moody’s BAA Corporate Bond Index have increased. The former, a benchmark off which many loans are priced, went from 3.97 to nearly 4.2 percent between late February and March 11, and the latter is moving faster and widening the spread. Costello sees that widening spread as a leading indicator of risk aversion, and eventually an increase in cap rates. 

The impact on the real economy — higher energy rates, rising inflation, increased costs, an economic slowdown and corporate tenants leasing less space — will take much longer to percolate. Costello recommends keeping an eye on second-quarter brokerage reports to gauge where the real estate market is going. 

But, if and when that impact is felt — if a barrel of oil costs $125 for half a year or longer because of persistent supply problems — that begins to cycle through the economy and real estate market. Inflationary pressure hits buying power, hurting retail and hotels, while rising energy costs spike utility bills for apartments in particular, hammering net operating income and squashing the seeds of multifamily recovery. It “slams the brakes on the U.S. economy,” said LightBox’s Clancy.

There’s real risk to a prolonged conflict. Chinn also sees the conflict, regardless of its next stages, reinforcing many emerging themes in real estate investment and operations during this period of increasing instability. That includes reassuring the resiliency, as well as the cyber and physical security, of key assets. (Attacks on Amazon data centers in the Gulf have raised the specter of these assets becoming new wartime targets.)

But there’s also a sense that a repeated cycle of crises — COVID in 2020 and 2021, Russia’s invasion of Ukraine in 2022, the inflation spike that same year, the 2023 regional banking breakdown — have created a numbness to crisis. 

“The fact that none of this has turned into the sky really is falling,” Clancy said, “has made people a bit comfortable.”