GENERATING RESILIENT INCOME GROWTH AMID UNCERTAINTY
After a big correction, a lot of bad news is already priced into global real estate markets. Heightened uncertainty is reducing upside potential in the next cycle, but it has not derailed the recovery and growth story.
On the back of the sharp drop in sentiment in April 2025, it is important to note that real estate has been through a big correction in recent years. Global prime values fell by nearly 30% in real terms between 2022 and 2024 and have risen little since. As such, a lot of bad news is already factored in, implying a strong degree of resilience to the current spike in uncertainty. Real estate does not always follow wider financial markets either. Unlike equities, for example, private real estate values didn’t have a big ramp up over the past year or so. However, when equity markets fall 20% or more, real estate on average records a 10% decline, so there are clearly additional downside risks in play now.
Heightened risk and uncertainty both dampen the outlook and reduce upside potential, but there are supporting factors for real estate too, including low supply, defensive sectors such as residential and long-term structural trends that are still supportive of demand in such sectors as data centers, urban logistics and senior living. The recovery story continues, and global returns are set to improve again this year as the drag from yield expansion fades.
Explore latest themes and more in PGIM Real Estate’s 2025 Global Outlook.
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