A “window of opportunity” is opening up in global real estate over the next 12 to 18 months, according to Oxford Economics.
The independent economic advisory firm said 2025 and the latter stages of this year will offer the best “entry point” for investors looking to capture a recovery in real estate markets, particularly in Europe, which is “leading the way”.
In its latest research briefing, the firm has warned that if investors wait until 2026 they could find that “number of compelling excess return opportunities will fall”.
The briefing, by Mark Unsworth, director of global real estate economics, said: “Significantly, we expect next year to offer more ‘excess return’ opportunities than any other year over the forecast horizon.”
But he also said the share of “neutral return” – which deliver neither “excess” nor “subpar” returns – will broaden from 2026, “reflecting the challenge of this cycle” of “limited capital growth driven by yield compression due to higher terminal rates relative to pre-pandemic”.
Europe was found to offer the most excess return opportunities next year, followed by North America and Asia-Pacific. Oxford Economics said North America had a larger proportion of subpar return markets and Asia-Pacific had more in the neutral category.
The most appealing sector globally continued to be industrial with an index score of 59.3, and Oxford Economics predicted that the best opportunities next year would be in Switzerland, the Netherlands, Sweden, Germany and Portugal.
Hotels were in second place, with an index score of 53.9, just in front of residential at 53.8. And while retail’s score had risen by 0.6 over the past six months to 52.4, offices had fallen a further 1.7 to 45.7.
“The global office market faces a prolonged period of adjustment as markets grapple with a number of challenges, such as enduring hybrid working, climate-related obsolescence, and slowing or shrinking working-age populations,” Unsworth said.
Oxford Economics also warned about risks to its forecast, with its Global Business Sentiment Index suggesting that companies were becoming less positive about near-term prospects for the global economy.
“Our baseline is predicated on sustained interest rate cuts, but we remain vigilant of changes that have the potential to knock disinflation off course, such as a resurgent China economy on the back of monetary and fiscal stimulus or geopolitical events,” Unsworth said.
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