Constructing a global real estate portfolio that can deliver consistent NOI growth will be crucial to mitigating the risks associated with a transition toward a higher interest rate environement.
Global Head of Investment Research, PGIM Real Estate
Dr. Peter Hayes
The outlook for global real estate markets is clouded by elevated uncertainty, with higher inflation, geopolitical conflict, supply disruptions and rising interest rates contributing to a volatile backdrop. Real estate has been resilient to shock in recent years, but downside risks have risen, limiting tactical investment opportunities. Increasingly, the focus for investors is on assets in sectors and markets that deliver dependable cash flows and in which demand is structurally supported by favorable underlying trends.
Investing Through Uncertainty
GLOBAL INVESTMENT OPPORTUNITY MAP
DIGITAL TRANSFORMATION
The use of technology across all aspects of business, personal life and commerce is growing at a rapid rate, is driving shifts in consumer behavior and is increasing the demand for real estate and infrastructure solutions to meet growing data requirements.
House prices have risen much faster than incomes in most of the major economies in the past few cycles, leaving a vast pool of younger households in need of affordable living spaces in both the sales market and the rental market.
HOUSING NEEDS
Projections say populations will increasingly exhibit older age profiles across most of the major economies—and in some key emerging markets too. Real estate space needs are evolving to accommodate the lifestyles and health-care needs of larger, older populations.
AGING POPULATION
Both occupiers and landlords are becoming increasingly aware that they must evolve their business activities, occupational footprints and investment portfolios toward ambitious targets—such as net zero carbon—because shareholders and investors are demanding those evolutions to both capture potential upside and protect against future regulation.
SUSTAINABILITY
Tactical Opportunities
STRUCTURAL GROWTH
AMERICAS
EUROPE
ASIA PACIFIC
SENIOR HOUSING
OMNICHANNEL RETAIL
APARTMENT AND LOGISTICS
SINGLE-FAMILY RENTAL HOUSING
MEXICO INDUSTRIAL AND LOGISTICS
DATA CENTERS
LIFE SCIENCES
AMERICAS
SENIOR HOUSING
OMNICHANNEL RETAIL
APARTMENT AND LOGISTICS
SINGLE-FAMILY RENTAL HOUSING
Demand is rising on the back of significant growth in older populations and will have to be met by significant new supply.
Industrial and retail spaces play complementary roles as e-commerce expands.
Sunbelt metros have outperformed in recent years, but coastal markets now offer attractive opportunities.
A confluence of tailwinds favoring single-family-rental demand makes the sector an attractive investment opportunity.
Download Report
LIFE SCIENCES
DATA CENTERS
MEXICO INDUSTRIAL AND LOGISTICS
Industrial assets in Mexico offer elevated risk-adjusted returns, as high cap rates compensate for country risk premium and lower rent growth.
Strong structural demand for data usage is driving
ongoing growth in real estate requirements and absorption.
Real estate demand is rising to cater to an expansion in life science linked to aging population and ongoing pandemic responses.
Value Creation Drivers
LIFE SCIENCES
DATA CENTERS
URBAN LOGISTICS
ESG-COMPLIANT OFFICES
RENTAL HOUSING
SENIOR HOUSING
DATA CENTERS
CENTRAL BUSINESS DISTRICT
ESG - COMPLIANT OFFICES
LOGISTICS
RENTAL HOUSING
Download Report
Real estate demand is rising to cater to an expansion in
life science linked to aging population and ongoing
pandemic responses.
LIFE SCIENCES
Strong structural demand for data usage is driving
ongoing growth in real estate requirements and absorption.
DATA CENTERS
European logistics has a strong returns outlook in particular, urban distribution space close to large, affulent cities.
URBAN LOGISTICS
In high-value markets, office refurbishments that meet
high environmental, social and governance (ESG) standards offer attractive opportunities.
ESG-COMPLIANT OFFICES
Institutions have a growing role to play in delivering modern, affordable living space in major cities.
RENTAL HOUSING
Demand is rising on the back of significant growth in older populations and will have to be met by significant new supply.
SENIOR HOUSING
EUROPE
Download Report
Strong structural demand for data usage is driving
ongoing growth in real estate requirements and absorption.
DATA CENTERS
An employment recovery bodes well for office demand, with sharper focus on quality and sustainability.
CENTRAL BUSINESS DISTRICT ESG - COMPLIANT OFFICES
An improving rental growth outlook continues to support opportunities for developing and owning modern logistics space, including in attractively priced regional Japan.
LOGISTICS
Institutions have a growing role to play in delivering modern, affordable living space in major cities.
RENTAL HOUSING
ASIA PACIFIC
Download Report
Opportunities that we believe stand to benefit from universal, long-lasting themes that act as pillars of demand growth and support long-term NOI growth potential.
Investment opportunities arise on a tactical basis when returns are expected to be higher than average for a nonpermanent period of time. Such opportunities arise as results of relative pricing differentials; or when values in a sector, geography or market are lower than elsewhere; or when a short-term boost to demand relative to existing supply is expected to result in periods of above-average rental growth or sustained yield compression. Tactical opportunities are strongest when they interact with high-conviction themes that support longer-term growth potential.
Read Our Report
Structural Growth
Investing in assets, sectors or geographies in which the underlying demand for real estate is supported primarily by exposure to favorable changes to real estate demand has risen based on the high-conviction themes set out above. On that basis, demand is set to grow at an above-average pace as societal resources get shifted to meet rising needs and as demand also becomes relatively resilient to economic shocks—as almost-guaranteed year-on-year increases act to dampen any short-term hit to sentiment and quickly mop up excess supply.
Investment opportunities arise on a tactical basis when returns are expected to be higher than average for a nonpermanent period of time. Such opportunities arise as results of relative pricing differentials; or when values in a sector, geography or market are lower than elsewhere; or when a short-term boost to demand relative to existing supply is expected to result in periods of above-average rental growth or sustained yield compression. Tactical opportunities are strongest when they interact with high-conviction themes that support longer-term growth potential.
Tactical Opportunities
Tactical Opportunities
STRUCTURAL GROWTH
Investing in assets, sectors or geographies in which the underlying demand for real estate is supported primarily by exposure to favorable changes to real estate demand has risen based on the high-conviction themes set out above. On that basis, demand is set to grow at an above-average pace as societal resources get shifted to meet rising needs and as demand also becomes relatively resilient to economic shocks—as almost-guaranteed year-on-year increases act to dampen any short-term hit to sentiment and quickly mop up excess supply.
Tactical Opportunities
Structural Growth
Value Creation Drivers
Investment opportunities arise on a tactical basis when returns are expected to be higher than average for a nonpermanent period of time. Such opportunities interact with high conviction themes but offer a different form of value creation from such factors as relative pricing differentials, low values following a correction, or when a short-term demand is high relative to supply.
Investing in assets in which the underlying demand for real estate is supported by favorable changes to real estate demand arising from long-term high-conviction themes. The structural component allows for stronger NOI growth potential over time, as well as offering greater resilience to shocks.
Structural Growth
Tactical Opportunities
Accelerated change
DIGITAL TRANSFORMATION
DIGITAL TRANSFORMATION
DIGITAL TRANSFORMATION
The use of technology across all aspects of business, personal life and commerce is growing at a rapid rate, is driving shifts in consumer behavior and is increasing the demand for real estate and infrastructure solutions to meet growing data requirements.
House prices have risen much faster than incomes in most of the major economies in the past few cycles, leaving a vast pool of younger households in need of affordable living spaces in both the sales market and the rental market.
Projections say populations will increasingly exhibit older age profiles across most of the major economies—and in some key emerging markets too. Real estate space needs are evolving to accommodate the lifestyles and health-care needs of larger, older populations.
Both occupiers and landlords are becoming increasingly aware that they must evolve their business activities, occupational footprints and investment portfolios toward ambitious targets—such as net zero carbon—because shareholders and investors are demanding those evolutions to both capture potential upside and protect against future regulation.
Real estate demand is rising to cater to an expansion in life science linked to aging population and ongoing pandemic responses.
LIFE SCIENCES
Strong structural demand for data usage is driving
ongoing growth in real estate requirements and absorption.
DATA CENTERS
Institutions have a growing role to play in delivering modern, affordable living space in major cities.
RENTAL HOUSING
European logistics has a strong returns outlook in particular, urban distribution space close to large, affulent cities.
URBAN LOGISTICS
In high-value markets, office refurbishments that meet
high environmental, social and governance (ESG) standards offer attractive opportunities.
ESG-COMPLIANT OFFICES
Demand is rising on the back of significant growth in older populations and will have to be met by significant new supply.
SENIOR HOUSING
Strong structural demand for data usage is driving
ongoing growth in real estate requirements and absorption.
DATA CENTERS
An improving rental growth outlook continues to support opportunities for developing and owning modern logistics space, including in attractively priced regional Japan.
LOGISTICS
Institutions have a growing role to play in delivering modern, affordable living space in major cities.
RENTAL HOUSING
An employment recovery bodes well for office demand, with sharper focus on quality and sustainability.
CENTRAL BUSINESS DISTRICT ESG - COMPLIANT OFFICES
HOUSING
NEEDS
HOUSING
NEEDS
Investing in assets in which the underlying demand for real estate is supported by favorable changes to real estate demand arising from long-term high-conviction themes. The structural component allows for stronger NOI growth potential over time, as well as offering greater resilience to shocks.
Investment opportunities arise on a tactical basis when returns are expected to be higher than average for a nonpermanent period of time. Such opportunities interact with high conviction themes but offer a different form of value creation from such factors as relative pricing differentials, low values following a correction, or when a short-term demand is high relative to supply.
The outlook for global real estate markets is clouded by elevated uncertainty, with higher inflation, geopolitical conflict, supply disruptions and rising interest rates contributing to a volatile backdrop. Real estate has been resilient to shock in recent years, but downside risks have risen, limiting tactical investment opportunities. Increasingly, the focus for investors is on assets in sectors and markets that deliver dependable cash flows and in which demand is structurally supported by favorable underlying trends.
AMERICAS
EUROPE
ASIA PACIFIC