IN FOCUS6-8 min read

Schroders Capital Global Real Estate Lens January 2024: your go-to guide to global property markets

Our latest analysis highlights the key data and trends that matter to global real estate investors.

31/01/2024
Schroder Asian Investment Grade Credit
Read full reportSchroders Capital Global Real Estate Lens January 2024
19 pages

Authors

Kieran Farrelly
Head of Global Solutions, Real Estate

We are pleased to provide you with the January edition of our monthly Global Real Estate Lens summarising the key data and trends for prevailing economic and capital market conditions, real estate occupier markets, and private real estate debt markets.

Current market circumstances and the economic outlook are likely to continue to lead to pressure on pricing of real assets globally over the coming months, although material inflation is easing and forward interest rate curves in the major markets are suggesting levels have peaked at their current elevated level. Uncertainty remains especially in light of recent geopolitical events and the risk of this triggering broader contagion effects. Fringe markets and secondary assets remain most susceptible to anticipated declines as investors and banks alike are looking to de-risk portfolios.

January’s Lens highlights the following:

  • Schroders continues to see high inflation across a wide set of markets, though pressures have eased (lower energy prices, normalisation in supply chains) and the trend is pointing downwards.
  • However, geopolitical risks are exerting pressure on supply chains with conflict in the Red Sea elevating shipping costs.
  • We expect monetary policy to loosen with rate cuts being anticipated in 2024 as the growth and inflation dynamic shifts. Global trading conditions continue to be impacted by the prevailing environment, as flash PMIs remain weak.
  • Occupier demand for office and logistics space continued a modest slowdown during the third quarter, but relatively tight vacancy and supply conditions prevail, especially for high quality space and most notably in the industrial/logistics sector.
  • There are exceptions to this in certain major Asian office markets where rising vacancy and near-term deliveries of new supply are leading to office rents trending down.
  • Investment activity remains very subdued with volumes in major markets around the level last seen during the GFC.
  • Indeed, over the 12-months to Q3 2023, MSCI data showed global transaction volumes declined by 44%. European and US deal volumes were most impacted, falling by 53% over this period.
  • Further declines in transaction pricing were recorded during the fourth quarter of 2023, according to Green Street Advisors data. Both Europe and the US have experienced significant annual falls of 11% and 16% respectively. In both Europe and the US, offices fell furthest followed by multifamily.
  • Negative global core real estate fund performance moderated during Q3 2023 posting a -1.3% local currency total return versus -1.9% in the prior quarter. Global non-core performance showed a moderately steeper fall of -1.7% return during the third quarter of 2023.
  • Global private real estate fundraising slowed dramatically during 2023, with Preqin registering $132.9bn of new capital raised in the year compared to $191.7bn raised in 2022 and $236.6bn in 2021. Dry powder levels decreased to $387.6bn as managers drew capital to manage their programmes in what remain challenging market circumstances.
Read full reportSchroders Capital Global Real Estate Lens January 2024
19 pages

Authors

Kieran Farrelly
Head of Global Solutions, Real Estate

Topics

Contact Schroders Capital
Follow us

Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. All investments involve risks including the risk of possible loss of principal.