Q1 2025 Real Estate Securities Outlook: A Turning Point
Feb 10, 2025
PGIM Real Estate reviews the REIT market and current opportunities in first quarter 2025.
After a challenging close to 2024, the global REIT market is showing signs of renewed strength, with valuations looking increasingly attractive. A sharp pullback driven by yields and interest-rate volatility in December has created compelling opportunities.
- United States: Increased private-equity capital raising and discounted REIT valuations reflect the potential for more privatizations to come. Higher rates and tighter lending are restricting new supply, reinforcing a stable fundamental backdrop, and setting the stage for accelerated earnings growth.
- Europe: Despite a slower growth outlook and political risks, we see a moderated positive outlook for the European listed real estate market. Private valuations should be near their trough in most sectors and countries in the region, and many REITs offer attractive cash flow yields. We remain cautious and focus on sectors with structural growth and positive occupier trends.
- Asia Pacific: December’s sell-off reflected tempered expectations for rate cuts. While the outlook is dependent on actual macroeconomic data, Trump’s presidency seems to foment rising inflationary expectations. A mild inflationary environment bodes well for Asia-Pacific REITs underpinned by strong structural factors.
With global supply-side constraints and improving capital flows, the REIT market appears well-positioned for a rebound, particularly as earnings momentum builds through 2025. The current backdrop serves up interesting opportunities in the REIT market, especially where occupier fundamentals are backed by structural tailwinds such as data centers’ AI and cloud-driven demand. We also remain focused on companies wherein we see catalysts and have conviction on earnings growth and/or upside value.
Increased volatility has presented tactical opportunities in specific markets with unique demand dynamics, such as New York.
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The views expressed herein are those of PGIM Real Estate investment professionals at the time the comments were made and may not be reflective of their current opinions and are subject to change without notice. Neither the information contained herein nor any opinion expressed shall be construed to constitute an offer to sell or a solicitation to buy any security.
Certain information in this commentary has been obtained from sources believed to be reliable as of the date presented; however, we cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed. The information contained herein is current as of the date of issuance (or such earlier date as referenced herein) and is subject to change without notice. The manager has no obligation to update any or all such information, nor do we make any express or implied warranties or representations as to the completeness or accuracy. Any projections or forecasts presented herein are subject to change without notice. Actual data will vary and may not be reflected here. Projections and forecasts are subject to high levels of uncertainty. Accordingly, any projections or forecasts should be viewed as merely representative of a broad range of possible outcomes. Projections or forecasts are estimated, based on assumptions, subject to significant revision, and may change materially as economic and market conditions change.
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