Schroders Capital Global Real Estate Lens Q1 2025: your go-to guide to global property markets
Deal activity picked up at the end of 2024, reflecting improving sentiment, and despite continued macroeconomic headwinds there is now clear evidence of prices recovering following significant falls.
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Our quarterly Global Real Estate Lens summarises the key data and trends for prevailing economic and capital market conditions, real estate occupier markets, and private real estate debt markets.
Overall, through to the end of Q4 2024, we have continued to see subdued transaction volumes and performance, although activity did pick up at the end of last year – and further improving sentiment should catalyse activity going forward. Additionally, and despite ongoing macroeconomic challenges, there is now clear evidence of transaction prices recovering following significant falls over the past two years across multiple sectors.
Key takeaways from the Global Real Estate Lens Q1 2025:
- Our forecast shows the world continuing to see falling inflation in 2025 and 2026, but annualised headline CPI rates did tick higher in Q4 compared to Q3, and core CPI inflation is expected to remain sticky.
- We continue to see potential for the pace of interest rate cuts to slow to a greater extent than priced in by markets, as a result of reinflationary pressures in the US and elsewhere.
- Generally tight vacancy and supply conditions continue to support real estate operating fundamentals and rental growth across markets and sectors. Elevated construction costs and labour shortages are likely to further constrain supply.
- Global transaction volumes remain subdued in a historic context, but there was a meaningful (31%) uptick in Q4 2024 with investment picking up across all regions. Improving sentiment should catalyse activity going forward.
- There is now clear evidence of transaction prices recovering after significant falls over the past two years, with the US and Europe seeing annual price rises on average in 2024 of 2.1% and 2.5%, respectively.
- Modest positive global real estate fund performance was recorded over Q3 2024, with core funds delivering 0.4% and non-core 0.2% total returns. This performance lags broader market price movements.
- Global private real estate fundraising slowed, although the number of funds raised increased slightly during 2024. Approximately $106bn was raised in 2024, while dry powder levels decreased moderately to a little over $350bn.
- Fewer US banks were tightening standards in Q4 2024 – although loan standards remain historically high – and margins for commercial real estate mortgages have been stable.
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