Market Outlook 2024

Staying alive. After a tumultuous 2023, global real estate investors are bracing for more difficult conditions in 2024, perhaps this is best summed up by the industry catch cry of “stay alive ‘til ’25” to illustrate the challenges of high interest rates, lower values and rising distress.

Survive and thrive. In this context, investors are looking more broadly for demand growth and resilient returns, leading many to the relatively stable and less correlated markets of Australia and New Zealand, where firm population gains are driving an unfolding surge in demand.

The big pivots. With interest rates holding higher for longer, passive and levered real estate strategies reliant on cheap debt no longer work. Indeed, investors are keenly reallocating from passive to active, from office / retail to living / logistics and from equity to credit.

Seeking shelter. Changing demand and falling prices are locking in underperformance for specific sectors for years ahead. Passive rent collection is challenging. Levered beta is strained by elevated rates. Instead, look to firmer sectors, alpha generation and resilient credit.

Life in the fast lane. Undoubtedly, residential is shaping up as the standout sector for the year ahead, given rapid population growth, alongside diminished supply, driving marked undersupply. Already, housing markets are responding with broad gains in rents and values.

Tips for navigating 2024. Given this market outlook, our three pieces of advice for the year ahead are… seek shelter (from underperforming sectors), take more credit (to improve portfolio returns) and live a little (and track the robust drivers for residential and other living sectors).