Key Takeaways
- • Hazelview Investments' 2024 Global Public Real Estate Outlook Report projects REITs will outperform many investment alternatives despite slower economic growth, citing resilient corporate earnings and constrained real estate supply as primary drivers.
- • Global REIT earnings are forecasted to rise over 10% cumulatively across 2024 and 2025, supported by annual contractual rent increases, positive re-leasing spreads, decreased vacancies, and higher property tax and payroll cost factors.
- • Historical analysis of five waves of central bank rate hikes since 1995 reveals REITs delivered strongest returns during periods when rate hikes paused—a dynamic now favoring REITs as interest rate trajectory improves compared to the prior two years.
- • A two-year decline in real estate supply driven by elevated construction and financing costs, combined with sustained high demand for residential and commercial real estate, is expected to support property valuations across key regions and asset classes.
- • Corrado Russo, managing partner and head of Global Securities at Hazelview Investments, characterizes current market conditions as "an extraordinary market opportunity" shaped by shifting monetary conditions and "compelling valuations" in the REIT sector.
Summary
Hazelview Investments' 2024 Global Public Real Estate Outlook Report positions real estate investment trusts as poised for outperformance after a challenging two-year period, driven by a confluence of favorable macroeconomic and supply-demand dynamics. The report argues that despite projected slower economic growth, REITs will benefit from resilient corporate earnings, constrained real estate supply, and an improved interest rate trajectory relative to recent years.
The earnings growth outlook forms a cornerstone of the bullish thesis. Global REIT earnings are forecasted to rise more than 10% cumulatively across 2024 and 2025, even accounting for headwinds including increases to property taxes, payroll costs, and interest expenses. Positive factors reinforcing earnings include annual contractual rent increases embedded in lease agreements, affirmative re-leasing spreads at lease expiration, and declining vacancy rates across sectors.
The supply-demand imbalance represents a second critical performance catalyst. The report anticipates a two-year decline in real estate supply, attributable to the elevated cost of construction and project financing over the past 12 months. This constrained supply environment contrasts with sustained high demand for both residential and commercial real estate, creating favorable conditions for property value appreciation and REIT performance across key regions and property types.
Historical precedent supports the constructive near-term outlook. Analysis of five waves of central bank rate hikes since 1995 demonstrates that REITs delivered strongest returns during periods when rate hikes paused. The current environment, characterized by an improving interest rate trajectory compared to the prior two years, aligns with this historically favorable pattern. Corrado Russo, managing partner and head of Global Securities at Hazelview Investments, framed the opportunity as follows: "The shifting tides of economic and monetary conditions, coupled with compelling valuations, create a canvas for strong performance in the REIT market in 2024," emphasizing that current conditions represent "an extraordinary market opportunity."
The earnings growth outlook forms a cornerstone of the bullish thesis. Global REIT earnings are forecasted to rise more than 10% cumulatively across 2024 and 2025, even accounting for headwinds including increases to property taxes, payroll costs, and interest expenses. Positive factors reinforcing earnings include annual contractual rent increases embedded in lease agreements, affirmative re-leasing spreads at lease expiration, and declining vacancy rates across sectors.
The supply-demand imbalance represents a second critical performance catalyst. The report anticipates a two-year decline in real estate supply, attributable to the elevated cost of construction and project financing over the past 12 months. This constrained supply environment contrasts with sustained high demand for both residential and commercial real estate, creating favorable conditions for property value appreciation and REIT performance across key regions and property types.
Historical precedent supports the constructive near-term outlook. Analysis of five waves of central bank rate hikes since 1995 demonstrates that REITs delivered strongest returns during periods when rate hikes paused. The current environment, characterized by an improving interest rate trajectory compared to the prior two years, aligns with this historically favorable pattern. Corrado Russo, managing partner and head of Global Securities at Hazelview Investments, framed the opportunity as follows: "The shifting tides of economic and monetary conditions, coupled with compelling valuations, create a canvas for strong performance in the REIT market in 2024," emphasizing that current conditions represent "an extraordinary market opportunity."
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