Global Real Estate Outlook Mid-Year 2024: A New Cycle of Contrasts

10 min read 26 Jun 24

While expectations for fast and furious interest rate cuts globally have been dialled back, an increased risk premium for property, combined with improving rental growth prospects given a brighter economic outlook, supports the view that yields may have moved out by far enough. In our view, with few exceptions (such as Japanese offices), entry pricing now also looks attractive, providing a significant opportunity for new capital, and setting the scene for what could be a fine vintage for investments.

Historically, downturns have tended to coincide with periods of high supply, leading to rising vacancy rates, falling rents and a slow rebound. In contrast, this downturn began with minimal new supply, as pandemic uncertainty, tougher financing conditions and higher construction costs delayed or terminated development projects, supporting occupational markets even as capital values fell. With continued economic uncertainty and rising ESG standards, Gross Development Values and therefore development feasibility has declined. Already limited supply pipelines are shrinking as a result.

For ever-popular ‘beds and sheds’, undersupply has driven significant rent rises in recent years, therefore restricted development in the face of growing demand should continue to support further growth over the medium term, albeit at a more moderate pace.

For retail and offices, an undersupply shock may have come at the right time. Now largely challenged by structural oversupply, both sectors could benefit from shrinking development pipelines, helping to mitigate vacancy – and rental weakness – even as occupiers reduce their space requirements.

  • While we believe the coming quarters could well prove to be a fine vintage for global real estate investment, investors should be aware of leverage issues and refinancing challenges . These could hinder the recovery for certain asset types within selected parts of the property market as we enter a new cycle.

With the turning of the cycle and a more positive outlook for real estate moving forward, investment performance is likely to be generated by income qualities, rather than yield compression-driven capital appreciation. We see attractive investment propositions reflecting one or more of the following income characteristics: 

  • Income Growth: Largely stimulated by strong supply-demand imbalances, owning these properties enables landlords to benefit from positive market dynamics and grow real rents between (and sometimes within) leases
  • Income Return: Characterised by higher yielding property types (i.e. where income constitutes a greater proportion of an asset’s value), coupled with sustainable rental levels
  • Income Preservation: Resilient cash flows with low risk of vacancy or decline and which have an ability to keep pace with inflation; may include longer leases backed by strong tenant covenants
1The pipeline of incoming regional and sub-regional shopping centre space in 2024 is estimated to be less than 10% of the historical 10-year average. Source: JLL, Q1 2024.
2Based on a sample of 15 larger banks. Source: Borsen-Zeitung (2024), "".
3For German Pfandbrief banks (which have a c.60% national market share), Scope analysis suggests the largest German lenders have manageable NPL ratios of under 3-5% across their CRE loans, some as low as 1%. Source:  “”. 
4Based on analysis of banks that disclose this data. Source:”.
5Source: EBA, Q4 2023, "”.
6Source:, Q1 2024, (note – includes Owner Occupier CRE, Non-owner Occupier CRE and Multifamily”.
7Source: APRA, September 2023, "”.
8As a proportion of total deal volumes (circa 8%), rather than total € value of distressed sales (which was registered in 2014).
9For the period 2024-26 inclusive. Source: CBRE (Q4 2023).

The value of investments will fluctuate, which will cause prices to fall as well as rise and investors may not get back the original amount they invested. The views expressed in this document should not be taken as a recommendation, advice or forecast. Past performance is not a guide to future performance.