Investing.com — UBS believes buyers ought to regularly enhance their publicity to international direct actual property, citing enhancing market circumstances and enticing funding alternatives.
In a word addressed to its purchasers, UBS highlights the primary traits and forecasts shaping the worldwide actual property market.
The actual property sector has confronted important challenges, with transaction volumes down 44% in 2023 in comparison with an already weak 2022.
Nonetheless, UBS expects international transaction volumes to rebound to round $800 billion in 2024, from $600 billion in 2023.
“Market quantity peaked at $1.25 trillion in 2021; the worldwide investable liquid industrial actual property market is estimated at $35 trillion,” the financial institution writes.
Nonetheless, the absence of pressured sellers would have restricted transaction volumes.
“Money-rich buyers at the moment are beginning to deploy capital,” observes UBS, underscoring their sturdy place in asset acquisition.
Leasing exercise in key segments akin to high-quality places of work, retail and motels stays subdued however is exhibiting indicators of restoration, in response to the financial institution.
On the identical time, rental revenue is growing because of lease reversion and indexation, which UBS believes will play a key position in offsetting ongoing worth corrections.
Wanting forward, the financial institution expects inflation and rates of interest to spike, making actual property investments extra enticing as widening yield spreads present enticing alternatives. They anticipate rental revenue development to more and more offset worth corrections, and they don’t anticipate credit score spreads to widen considerably attributable to refinancing pressures.
After a troublesome 2023, marked by a complete return lack of 4.1%, UBS expects international actual property to generate a capital lack of 3.6% however an revenue yield of 4.5% in 2024. By 2025, they forecast returns above the long-term common of seven.5%. , pushed by a 9% rebound in transaction volumes.
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