Global Real Estate

After two years of significant repricing driven by aggressive rate hikes, central banks across developed markets have pivoted. Both the US Federal Reserve and the European Central Bank have implemented multiple rate cuts since last summer and are expected to make three additional cuts by the end of 2025. This shift in monetary policy has eased financing conditions, stabilised valuations, and reignited investor interest, evidenced by a notable uptick in transaction volumes across the US and Europe. Historically, such inflection points have heralded multi-year periods of outperformance, and the current environment appears to be following the same trajectory.

For Swiss investors, global real estate offers a broader universe of opportunities across diverse sectors and geographies. While Swiss unlisted real estate continues to provide defensive stability, long-term returns have historically lagged behind some international markets, such as the US. The NFI-ODCE Index (open-ended, diversified, core, equity real estate fund index in the US), for example, outperformed the Swiss KGAST Index by nearly 1.5% annually from 1998 to its latest peak in 2022 (after hedging costs). This performance differential was driven by stronger demographic and economic fundamentals, as well as sectors supported by structural growth, such as logistics and thematic alternatives, including student accommodation, medical offices, and data centres. These sectors benefit from various trends, including demographic shifts, e-commerce, and digitalisation, and are further supported by declining interest rates. Given the high premiums currently seen in Swiss listed real estate funds, the repriced unlisted global market and its diverse investment opportunities present a compelling entry point.

Renewed international investor confidence in real estate is underscored by a surge in investments by institutions. Pension funds, sovereign wealth funds, and insurers are actively repositioning for the new cycle, committing significantly to global real estate strategies. In recent months, we have seen large-ticket direct transactions and commitments flowing into specialised funds. Capital deployment is accelerating as valuations stabilise and fundamentals recover, leading to a more competitive landscape for high-quality assets. Looking at private fund capital flows, we observe increased allocations to funds, a significant slowdown in redemption activity, and a wave of rescinded redemptions, all clear indicators of renewed conviction in the asset class.

However, amidst this optimism, geopolitical uncertainty remains a defining feature of the investment environment. Trade tensions and residual inflationary pressures continue to create volatility. In this context, a diversified and strategically positioned real estate strategy is crucial. Sectors such as residential, healthcare, student and senior housing, self-storage, and data centres have historically shown resilience in weaker macroeconomic environments. They benefit from sticky demand and specialised tenant bases linked to long-term structural trends, making them less vulnerable to short-term market volatility. Thus, exposure to these sectors can drive returns even in slower growth phases. The availability of resilient sectors on an international scale further reinforces global real estate’s essential role in any diversified portfolio, offering reliable income, inflation protection, and outperformance potential – particularly in the current environment.