Research Reports

Highlights: US inflation is mismeasured, OER is the key culprit, Fed risks policy mistake, ironically limiting housing development, and CRE investment faces risk and opportunity.

2023 presented a challenging year for the European economy and commercial real estate (CRE) market. Economic growth slowed, property market fundamentals faced some associated headwinds, and the interest rate increase disrupted capital markets. Yet, in many ways 2023 represented a year of stabilization, not implosion, as ongoing post-pandemic adjustments continued. With the major regional central banks poised to cut rates in 2024, the outlook for both the economy and the CRE market looks brighter. We remain cautiously optimistic about the outlook for 2024 and more so for 2025.

In our first Perspectives for 2024, we share our views on the evolving global interest rates landscape, the knock-on effects for Asia Pacific (APAC) Real Assets markets, and how 2025 is setting up to be a vintage year for investors across different investment strategies.

Based on data collected from Hearthstone's portfolio of 1800 rental homes, a mix of houses and flats in low-rise apartment blocks. They recognize the importance that investors put on the ESG criteria of the homes they are investing in and the desire to understand what impact these investments have on the economy and communities where they are focused. Their latest report paints a picture for investors of what is being delivered and for whom, demonstrating value above and beyond capital returns.

While there is not a one-size-fits-all approach to track progress toward reducing emissions, due to the complexities of real estate portfolios, we believe intensity-based metrics offer a more flexible and reliable method for tracking decarbonization progress than absolute targets for reasons discussed in this paper.

Over the last decade, the logistics sector has experienced radical changes, handsomely rewarding real estate investors who positioned strategically to capitalize on emerging trends. Yet the sector continues to undergo significant transformations as new forces are at play. This edition of “The Decisive Eye" describes these trends and their implications for shaping logistics requirements. In particular, Principal Asset Management believes investors should pay keen attention to: Rising land scarcity and barriers to entry in core markets, increasingly stringent sustainability standards, and advancements in warehouse automation and AI-based technologies.

The COVID-19 pandemic dealt an unprecedented blow to the hospitality industry. Fortunately, travel has rebounded, and strong fundamentals bode well for the European hotel sector in the medium and long term. Yet for some hotel operators, cracks that surfaced during the pandemic are being made worse by high inflation and rising costs of debt. We believe this combination of strong fundamentals and pockets of distress presents unique opportunities for investment in the European hotel sector.

A combination of strong fundamentals and pockets of distress presents unique opportunities for investment in the European hotel sector. (Explore the investment case in detail in our first paper in this series.) Targeting independent hotels that are well located but underperform and require investment offers significant scope to create value through upgrading, repositioning, and improved operations. In this paper, the second in our European hotel sector series, we share our expertise on finding those value creation opportunities—undervalued or illiquid hotels with good micro locations within attractive markets.

The COVID-19 pandemic dealt an unprecedented blow to the hospitality industry. Fortunately, travel has rebounded, and strong fundamentals bode well for the European hotel sector in the medium and long term. Yet for some hotel operators, cracks that surfaced during the pandemic are being made worse by high inflation and rising costs of debt. We believe this combination of strong fundamentals and pockets of distress presents unique opportunities for investment in the European hotel sector. Explore the investment case in our first paper in this series.

The significant property valuation declines which have occurred in commercial real estate, the accompanying market stress, and the pullback in direct lending by the banks are creating attractive opportunities in real estate debt. As investors consider allocating capital to the space, it is important to understand the drawbacks of legacy strategies and portfolios in today’s marketplace and the benefits of new strategies which are not burdened by the risks related to legacy loans.