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Real Estate

2024 Outlook: Global Real Estate

December 2023 – 8 min read

Against a hazy backdrop, our real estate debt and equity experts bring today’s biggest challenges into focus—while also weighing in on where opportunities are emerging across the U.S., Europe, and Australia.

Maureen Joyce (Moderator): How has the increase in rates impacted real estate, and how are you thinking about a potentially ‘higher-for-longer’ rate environment?

John Ockerbloom: Against the backdrop of a significant rise in rates, transaction volumes across U.S. real estate markets have meaningfully declined this year. The shock to the system of a doubling of the risk-free rate has created a gap in prices between buyers and sellers, resulting in a transaction pipeline that’s around 60% below the average level of recent years.1 In addition, we are seeing underlying valuations continue to adjust in the private and public real estate markets in the U.S.

Going forward, rates could remain higher for longer—but this isn’t necessarily all bad for real estate. For example, while prices remain elevated today, there has been some cooling in the cost of materials and, to some extent, labor—which has been beneficial for development and redevelopment activity in real estate. Also, the shift in rates means that U.S. Treasuries are now hovering around 4%, which we believe is indicative of stability and much more consistent with the long-term average.

Nick Pink: While the significant rise in rates has indeed been a shock to the market, inflation has dropped back toward target in many European countries. In the year ahead, the prospects of rates returning to 2021 levels is remote, however, rate anxiety has eased in recent months. Against this backdrop, European property transaction volumes, having slumped in 2023, should begin to revive in 2024.

1. Source: Barings Real Estate Research. As of September 30, 2023.

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Maureen Joyce

Head of U.S. Real Estate Equity

John Ockerbloom

Head of U.S. & European Real Estate

Nick Pink

Head of European Real Estate Equity

Alastair Wright

Head of APAC Real Estate

The document is for informational purposes only and is not an offer or solicitation for the purchase or sale of any financial instrument or service. The material herein was prepared without any consideration of the investment objectives, financial situation or particular needs of anyone who may receive it. This document is not, and must not be treated as, investment advice, investment recommendations, or investment research.

In making an investment decision, prospective investors must rely on their own examination of the merits and risks involved and before making any investment decision, it is recommended that prospective investors seek independent investment, legal, tax, accounting or other professional advice as appropriate.

Unless otherwise mentioned, the views contained in this document are those of Barings. These views are made in good faith in relation to the facts known at the time of preparation and are subject to change without notice. Parts of this document may be based on information received from sources we believe to be reliable. Although every effort is taken to ensure that the information contained in this document is accurate, Barings makes no representation or warranty, express or implied, regarding the accuracy, completeness or adequacy of the information.

Any forecasts in this document are based upon Barings opinion of the market at the date of preparation and are subject to change without notice, dependent upon many factors. Any prediction, projection or forecast is not necessarily indicative of the future or likely performance. Any investment results, portfolio compositions and/or examples set forth in this document are provided for illustrative purposes only and are not indicative of any future investment results, future portfolio composition or investments. The composition, size of, and risks associated with an investment may differ substantially from any examples set forth in this document. No representation is made that an investment will be profitable or will not incur losses. Where appropriate, changes in the currency exchange rates may affect the value of investments.

Investment involves risks. Past performance is not a guide to future performance. Investors should not only base on this document alone to make investment decision.

This document is issued by Baring Asset Management (Asia) Limited. It has not been reviewed by the Securities and Futures Commission of Hong Kong.

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