Why UBS Thinks You Should Gradually Increase Exposure to Global Direct Real Estate By Investing.com
Investing.com — UBS believes investors should gradually increase exposure to global direct real estate, citing improved market conditions and attractive investment opportunities.
In a note to clients, UBS highlights key trends and predictions shaping the global real estate market.
The real estate sector faced significant challenges, with transaction volume falling 44% in 2023 compared to an already weak 2022.
However, UBS forecasts a recovery in global transaction volume to around $800 billion in 2024, up from $600 billion in 2023.
“Market volume to peak at $1.25 trillion in 2021; the global liquid investable commercial real estate market is estimated at $35 trillion,” the bank writes.
However, the lack of forced sellers is said to limit the volume of transactions.
“Affluent investors are now starting to deploy capital,” notes UBS, underscoring their strong position in acquiring assets.
Leasing activity in key segments such as high-end offices, retail and hotels remains subdued but is showing signs of recovery, according to the bank.
Meanwhile, rental income is rising due to rent recovery and indexation, which UBS believes will play a key role in offsetting ongoing value corrections.
Looking ahead, the bank expects inflation and interest rates to peak, making real estate investments more attractive as the widening range of yields offers attractive opportunities. They anticipate that rental income growth will increasingly offset value corrections and do not anticipate a significant expansion of credit spreads due to refinancing pressures.
After a challenging 2023, which saw a total return loss of 4.1%, UBS expects global real estate to post a capital loss of 3.6% but an income return of 4.5% in 2024. By 2025, they forecast returns that will exceed the long-term average of 7.5%. , driven by a 9% increase in the volume of transactions.
