2024 Mid-Year Global Investment Outlook

2024 Mid-Year Global Investment Outlook

Walking Through the Threshold
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2024 Mid-Year Global Investment Outlook

As we pause to reflect on real estate developments so far in 2024, an overarching theme we’re observing is that we remain in a period of transition from an era of unusually low interest rates and easy financial conditions to a new market regime that has yet to fully take shape. This period, which our Global CIO, David Steinbach, has defined as the “liminal space,” is inherently defined by uncertainty and vulnerability.

Meanwhile, because elevated inflation continues to stubbornly stick around, we continue to find ways to adapt and thrive in the “higher for longer” interest rate environment that has become the new normal. As we operate at the threshold of a new economic cycle, we’re seeing some clear opportunities emerge across sectors and geographies:

Real Estate Sector Insights

What fundamentals are opening the doors to potential investment opportunities?

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Real Estate Sector Insights

■ Retail

We think this sector has arguably already undergone its “structural shift,” unlike office which is in the middle of it (see Exhibit 1). Even with lower demand, muted supply has resulted in historically low vacancies. We’re seeing opportunity to invest in the right locations and sub-types to take advantage of this recovery in rents and values.

Source: Costar, Hines Research. As of 1Q 2024.

■ Office

Trophy-grade office has continued to see positive demand despite broader office market challenges. In fact, this segment of the U.S. office market makes up just 6.5% of the overall market inventory, but has garnered more than 25% of office positive net absorption since 2000. Similar trends have emerged in office space built in the last 10 years. As more workers return to work, competition for these desirable spaces will only increase. And we must remind ourselves that work-from-home (WFH) appears to be largely a U.S. challenge, so we would argue that the office investment opportunity is more widespread and higher conviction in markets outside the U.S.

■ Living

The housing shortage in the U.S., Europe and part of Asia is pronounced and being further pressured by high interest rates and disrupted supply chains as these factors undermine the economics of new development. Recent multifamily portfolio and residential REIT take-private transactions reflect confidence in long-term appreciation and rental yields, with a growing trend towards build-to-rent communities to meet strong rental market demand.

■ Vintage Timing

Historically, some of the best fund vintages have occurred at times when values are correcting. From a historical standpoint, Hines Research has identified that 1993 especially stands out as a year where book valuations were still two years away from finding a bottom, but funds launched that year delivered the second-best vintage in the history of Preqin’s North American funds data. Given that context, history would suggest that 2024 may be an excellent vintage to put fresh capital to work.

Watch: Global CIO David Steinbach and Global Head of Research Joshua Scoville discuss opportunities for deploying capital in a new economic era, drawing on historical perspectives from past periods of elevated interest rates and inflation.

Global Views with Local Perspectives

Our research team explores how various sectors are faring across the Americas, Europe and Asia.

Americas Regional Perspective

Americas

2024 Mid-Year Outlook: Americas Perspective

Europe mid year outlook 2024

Europe

2024 Mid-Year Outlook: Europe Perspective

Asia mid year outlook 2024

Asia

2024 Mid-Year Outlook: Asia Perspective

Disclaimer


The content herein and in the report is provided for informational purposes only. Nothing above or in the report constitutes investment, legal, or tax advice or recommendations. Such content should not be relied upon as a basis for making an investment decision and is not an offer of advisory services or an offer to invest in any product or asset class. It should not be assumed that any investment in an asset class described herein will be profitable. Any projections, estimates, forecasts, targets, prospects and/or opinions expressed in these materials are subject to change without notice. Opinions or beliefs expressed in these materials may differ or be contrary to opinions expressed by others. Certain information above and in the report has been obtained from third-party sources. Hines has not independently verified such information.


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Americas Perspective