Table of Contents:
The current context of the real estate market
In recent years, the real estate market has shown signs of recovery thanks to a changing economic environment. With inflation falling and interest rates falling, many investors are reevaluating their strategies. However, it is essential to maintain a cautious approach, as the current recovery appears less robust than those observed in the past, such as during the Great Financial Crisis of 2008.
According to a report by BNP Paribas REIM, real estate could represent an attractive opportunity for investors, especially when the repricing phase ends.
The internal rate of return and the competitiveness of real estate
One of the main issues concerns the competitiveness of real estate compared to other asset classes. Analyzing the sector’s returns compared to sovereign bonds, it emerges that real estate may not seem attractive. However, considering future inflation and rental growth prospects, real estate’s internal rate of return becomes more attractive. This is especially true when compared to the risk/return of a multi-asset portfolio. In addition, the real estate sector could also offer advantages compared to stocks, which could be overestimated in an overly optimistic market
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The prospects for 2025 and the growing sectors
Looking to the future, investment volumes in the real estate sector should return to growth in 2025, with an estimated increase of 20% for institutional investors. However, market activity will remain below the average of the last 15 years. Germany is expected to lead the recovery, followed by the Nordic countries, while France shows slower signs of recovery. The most significant changes will concern asset allocation, with logistics emerging as the main asset class. This category is well positioned to benefit from rental growth in the coming years, while retail stores in strategic locations offer attractive opportunities, especially in the luxury and discount segments
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Niche sectors and future opportunities
In addition, investors are showing increasing interest in niche sectors such as data centers, student housing, and self-storage. These sectors are growing thanks to megatrends and their low availability, which will support long-term rental growth. Despite the challenges, the real estate market presents significant opportunities for those who are willing to explore new strategies and invest in emerging categories. The key to success lies in the ability to adapt to a constantly changing landscape and to identify areas with the greatest growth potential
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