Real estate set for a restart later in 2024
Total returns for investors across the living, offices and logistics sectors are expected to tick up over the second half of 2024, according to M&G Real Estate’s mid-year global outlook.
The conclusions come amid increasing rents across these three sectors, coupled with yields that are currently higher than a year or two ago. Strong prospects are further supported by structural undersupply and limited development.
In the living sector, M&G Real Estate’s report found that plunging multi-family housing starts, combined with the ongoing reduction in small landlords across the UK, will exacerbate the existing undersupply of good-quality private rented homes.
Total returns for investors across the living, offices and logistics sectors are expected to tick up over the second half of 2024, according to M&G Real Estate’s mid-year global outlook.
The conclusions come amid increasing rents across these three sectors, coupled with yields that are currently higher than a year or two ago. Strong prospects are further supported by structural undersupply and limited development.
In the living sector, M&G Real Estate’s report found that plunging multi-family housing starts, combined with the ongoing reduction in small landlords across the UK, will exacerbate the existing undersupply of good-quality private rented homes.
London and Manchester are already among the top five cities across the globe where rental growth, of 19% and 16% respectively, has reached historically high rates since the start of 2022. Higher growth rates were only marked in Sydney, at 44%, Melbourne, at 42%, and Madrid, at 32%, over the same period.
Elsewhere, the research indicated strong growth prospects for major urban hubs across the UK, with the undersupplied London and the wider South East region set to benefit going forward despite demand in the sector returning to pre-pandemic norms.
Finally, M&G Real Estate expects the best-quality shopping centres in the UK to outperform in an income-driven environment, with yields at record highs of 8.25% and the occupier market showing signs of life after years of distress.
Richard Gwilliam, head of property research at M&G Real Estate, said: “While 2024 is likely to mark the bottom of the cycle and an end to significant capital value falls, investors still need to navigate downside risks, especially for assets with structural challenges and high leverage.
“The higher-for-longer interest rate environment means that investors should focus on income as the main route to achieving target returns. Investment transactions over the next few quarters in the right kind of assets look set to benefit from high entry yields and strong rental growth in many markets.”
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