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Key themes for 2025: Riding the real estate recovery

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The painful reset of private real estate seems to be in the rearview mirror, and we expect 2025 to be a good vintage for real estate investment.

Our 2025 outlook highlights our top investment ideas and insights on the global need for housing, the strength of alternative property types, the rebirth of retail and the shifting nature of environmental, social and governance (ESG) considerations.



Click the themes below for highlights from the report:


Recovery

Recovery

Riding the real estate recovery

  • The last two years have been challenging for real estate due to rising interest rates and a market with more sellers than buyers
  • Global real estate values are showing signs of stabilizing, and total returns have ticked positive
  • All 21 countries in the MSCI Global Property Index experienced positive total returns for the quarter, the first time in two years

 

Chart 1

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Global opportunities
Global opportunities

Global opportunities

  • As 2024 came to a close, the global real estate market seemed to be turning a corner
  • Office markets remained the most challenged globally, but even within the sector we continue to see significant differentiation
  • In each region, country and property sector there are opportunities for savvy investors

 

Chart 2

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Data centers

Data centers

The next frontier: a global view on data centers

  • The global data surge has spurred a near insatiable demand for data center space
  • The global datasphere is projected to reach 181 zettabytes by 2025, nearly 12 times the size it was just 10 years earlier
  • As a result of a quickly reshaping landscape, we favor development in this sector versus a core strategy

Chart 3
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Alternatives

Alternatives

Alternatives in focus

  • Investors have increasingly turned towards alternative property types to generate diversification and outperformance
  • The U.S. population aged 75+ years is projected to increase from 8% today to 12% by 2040 which present an opportunity for U.S. medical office
  • Among the most popular alternative property investments in Europe is self-storage, which has benefited from cyclical and structural drivers post-pandemic
  • Japan is at the forefront of an aging population and remains the leading market for a senior living strategy

 

Chart 4

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Housing

Housing

The global need for housing

  • Demographic shifts and affordability headwinds will underpin rental housing demand across the globe in 2025 and beyond
  • In Europe and Australia, the growing youth population will drive student housing demand, while the U.S. will see solid senior housing demand
  • In Asia Pacific, affordability headwinds will sustain multifamily rental demand

 

Chart 5

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Office

Office

Where office markets are thriving

  • Office valuations in the U.S. are still searching for a bottom, but select European and Asia Pacific markets starting to sprout green shoots
  • Business conditions look brighter for 2025; steady hiring and rising return-to-office mandates should drive occupier demand higher
  • Fundamentals are a lot healthier in select regional cities such as Singapore and Tokyo, reinforced by low vacancy and robust business expansion
  • Sun belt markets are forecast to add 30% more office jobs than their previous cycle peak over the next 10 years

 

Chart 6

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Retail

Retail

Retail real estate in the era of convenience culture

  • Necessity retail has performed well as shoppers seek convenient retail offerings close to where they live and work
  • In the U.S., grocery-anchored retail is set up for solid performance due to renewed retailer demand and lack of new construction
  • Across Europe, MSCI recorded a 12-month total return outperformance for U.K. shopping centers and retail warehouses

 

Chart 7

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Net zero carbon
Net zero carbon

Will the global transition to net zero carbon buildings withstand political headwinds?

  • A low carbon future for the built environment is underpinned by three factors: regulation, occupier demand and investor preferences
  • Investors want to maximize returns and avoid exposure to stranded assets, so we expect the decarbonization trend to continue
  • Some of the biggest proponents of the energy transition have been the big tech firms who are now grappling with the huge rise in energy needs due to AI advances

 

Chart 8

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This material, along with the views and opinions expressed within, are for informational and educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market, economic or other conditions, legal and regulatory developments, additional risks and uncertainties and may not come to pass.

All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty (express or implied) as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information, and it should not be relied on as such.

The information provided does not take into account the specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made based on an investor's objectives and circumstances and in consultation with their financial advisors. Financial professionals should independently evaluate the risks associated with products or services and exercise independent judgment with respect to their clients. This material should not be regarded by the recipients as a substitute for the exercise of their own judgment. It is important to review your investment objectives, risk tolerance and liquidity needs before choosing an investment style or manager. This material does not constitute a solicitation of any securities in any jurisdiction in which such solicitation is unlawful or to any person to whom it is unlawful. Moreover, it neither constitutes an offer to enter into an investment agreement with the recipient of this document nor an invitation to respond to it by making an offer to enter into an investment agreement.

This information does not constitute investment research as defined under MiFID.

Important information on risk

Past performance is no guarantee of future results. All investments carry a certain degree of risk including, the possible loss of principal, and there is no assurance that an investment will provide positive performance over any period of time. Certain products and services may not be available to all entities or persons. There is no guarantee that investment objectives will be achieved.


Real estate investments are subject to various risks associated with ownership of real estate-related assets, including fluctuations in property values, higher expenses or lower income than expected, potential environmental problems and liability, and risks related to leasing of properties.

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