Real Estate Equity To Shine In 2024

Residential and logistics real estate sectors are promising in the European market, as per industry experts

The real estate sector could offer opportunities for European investors in 2024, according to market outlook. Jessica Hardman, head of European real estate portfolio management of the German asset management company DWS, said that her firm has observed a turnaround in the last and current quarter in infrastructure equity investments. “Infrastructure debt is also benefitting from the need for financing in connection with megatrends such as the transition to sustainable, climate-neutral energy supply and digitalisation,” she said.

According to Marcus Phayre-Mudge, fund manager of TR Property Investment Trust, the closure and suspension of many of the remaining open-ended daily dealing property funds reduces the options for private investors looking to take advantage of lower real estate valuations by entering the market or increasing their exposure. “Investors and the listed sector must grasp this opportunity. Market cycles over the last 30 years have shown that when interest rates peak, property equities recover more sharply than the wider stock market,” added Phayre-Mudge.

Sharing the firm's outlook for 2024, Hardman highlighted that the residential and logistics real estate sectors are “promising” in the European market. “Supply is low, higher financing costs are leading to significantly higher demand for rental properties and rental prices are likely to rise again,” said Hardman. She also sees opportunities in the area of real estate debt, i.e. the financing of real estate investments.

Margins have recently improved due to higher interest rates and the easing of competition, and the “interesting” areas include financing for sustainable real estate and residential and logistics properties, said Hardman. There will also be an increased need for refinancing in infrastructure financing over the next two years, as many debt instruments are due to expire. Interest rate premiums – 25 to 50 basis points higher for senior bonds and 50 to 75 basis points higher for junior bonds than before the Russia-Ukraine war – are currently attractive, added Hardman.