M&G: Higher interest rates creating a shift in mindset for property investors

Global property investors will need to rely more heavily on generating high yields and growth to successfully compete in an economic environment of increased interest rates and debt costs that now pervade many markets, according to M&G’s Global Real Estate Outlook report.

“The days of ‘lower for longer’ interest rates are firmly behind us. Global property investors can no longer rely on yield compression and cheap debt to drive returns — there needs to be a fundamental shift in mindset,” said Jose Pellicer, head of investment strategy at M&G Real Estate. “Investors may be naturally drawn to growth, but income is also of key importance given today’s higher rates. Investing in areas with strong demand drivers, such as the living and industrial sectors, could offer attractive returns through high income growth, as could sectors which allow inflation to be passed onto tenants, such as long-lease supermarkets. Committing to asset improvements or i