Global real estate to outperform bonds and equities over the next five years: Report

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Mark Unsworth (Photo: Linkedin)

BOSTON–Global real estate is likely to outperform bonds and equities over the next five years, according to a report from Oxford Economics.

Here are some key points from the report:

  • Global real estate returns are looking healthy over the next five years, providing a strong relative performance versus bonds and equities.
  • We forecast total returns for global direct real estate and REITs to average 6.5% to 7% annually over 2022-2026, significantly above bonds and equities, which are projected to return 0.7% and 2.5% per annum, respectively.
  • We also expect global economic expansion to support real estate income growth while structural forces keep long-run interest rates low, thus moderating the near-term impact of rate increases on property yields.

That said, risks from persistently higher inflation remain. Plus, there are uncertainties regarding the longer-term real estate outlook, such as the effect of structural forces on demand and the degree to which the climate transition affects obsolescence and future supply, according to the report.

“Despite tightening monetary policy, the prospects for both public and private real estate look good over the next five years, supported by healthy economic growth and a weight of capital searching for stable and predictable income streams,” said Mark Unsworth, associate director at Oxford Economics. “We expect real estate to outperform both bonds and equities over this horizon but the risk from persistently higher inflation remains. In addition, there are uncertainties regarding the longer-term real estate outlook, such as the effect of structural forces on demand and the degree to which the climate transition affects obsolescence and future supply.”

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