Investing.com — UBS believes investors should gradually increase exposure to global real estate, citing improved market conditions and attractive investment opportunities.
In a note to clients, UBS highlights key trends and forecasts shaping the real estate market.
The real estate sector is facing significant challenges, with transaction volumes down 44% in 2023 compared to an already weak 2022.
However, UBS projects a rebound in global transaction value to around $800 billion in 2024, up from $600 billion in 2023.
“Market volume increased by USD 1.25tr in 2021; The global market for commercial liquid debt is estimated at USD 35tr,” writes the bank.
However, the lack of forced sellers is said to have limited transaction volume.
“Affluent investors are now starting to move capital,” UBS notes, underscoring their strong position in asset acquisitions.
Leasing activity in key sectors such as high-end offices, shops, and hotels remains low but shows signs of recovery, according to the bank.
Meanwhile, rental income is increasing due to rent adjustments and indexation, which UBS believes will play an important role in ending ongoing price adjustments.
Looking ahead, the bank expects inflation and interest rates to rise, making real estate investments even more attractive as rising yields offer attractive opportunities. They predict that rental income growth will more than offset the price adjustment, and they do not foresee an increase in debt growth from financing pressures.
After a challenging 2023, which saw a 4.1% return loss, UBS expects global real estate to deliver a capital loss of 3.6% but a 4.5% net profit in 2024. By 2025, they predict a return exceeding the long-term average of 7.5%, driven by a 9% rebound in transaction volumes.