Investment Outlook 2024: Real Estate

As we look to 2024 and beyond, real estate investors find themselves in an uncertain economic environment. There is debate as to whether we will see multiple technical recessions, a deep recession, or escape recessions altogether.

Whichever camp investors are in, our view is that the short-term outlook includes relatively muted growth. But we do expect stronger recovery thereafter.

In the first half of 2023 transactions and investment activity fell to their lowest levels in over a decade. No region or property type has been immune. We expect this to create opportunity for 2024 and beyond.

Historically, investing after periods of deep uncertainty have delivered materially above-average performance. Private equity real estate vintages launched in the aftermath of the dotcom bubble and global financial crisis (GFC) proved to be highly fruitful.

What matters is to be guided by sustainable themes and a robust, tested investment framework.

What is our framework telling us today?

With the repricing seen thus far, more markets are offering fair or better value than 18 months ago. We think there are some overreactions in the repricing, and our framework is identifying them on a case-by-case basis.

Beyond the identification of value, each of the transactions we undertake will be underpinned by one or more of our sustainable themes. These are the durable trends that we expect to directly impact real estate value creation over the long-term.

Powerful long-term trends such as decarbonisation, deglobalisation, and demographics – which we collective call the 3D Reset – will also drive a markedly different economic and geopolitical environment over the next decade and beyond.

Decarbonisation cannot advance meaningfully without holding real estate to higher environmental standards. We expect to see increasing tenant demand and regulation for not just operationally net zero buildings, but “embodied” net zero carbon buildings.

Deglobalisation will have immense impact on sectors like hospitality and logistics. Demographic changes will have huge implications for the demand of purpose built, senior citizen housing formats in developed economies, where populations are ageing.

Technological advancement is having a huge impact on the office market and sought-after workplaces of the future will require attractive connectivity, sustainability profiles and amenity provision.

Our philosophy remains that real estate investors who align their success with that of their tenants’ businesses, will outperform. The days of simply collecting rents from long-term leases are now over. Investors that truly understand their tenant businesses, and recognise the challenges of a new investment era, will ensure the most positive outcomes and deliver long-term value.