The outlook for global real estate investment trusts (REITs) inthe ext two years is promising: according to te latest Global Outlook by Hazelview Investments REITs offer potential returns of between 13 and 15% anually. Among the five most promising investment themes in 2025 are seniour housing in the US, hotels in Japan and German residential housing.
The outlook for global real estate investment trusts (REITs) is promising in this year and the next: according to the latest “2025 Global Public Real Estate Outlook ” by Hazelview Investments, a global alternative investment manager specialising in real estate, REITs offer potential returns of between 13 and 15% p.a. up to the end of 2026. This includes an assumed annual dividend yield of 3.8%.
Global REITs ended 2024 with a total return of 4.6% after giving up some of the double-digit returns they had achieved over the course of the year, following the sharp market decline in the final weeks of the year, as Hazelview points out. Although the performance of REITs lagged behind that of global equities (19.2%), it clearly outperformed that of global bonds (- 1.7%) (source: Bloomberg LP, data as of 31 December 2024).
Hazelview’s positive outlook is shared by other market experts. For example, UBS forecast earnings growth of 6.2% in its outlook for global REITs in 2025. This would correspond to an improvement of around 100 basis points compared to 2024 (source: UBS Global Research, 16 December 2024). That also reflects inflation in past years as well as the increasing shortage of real estate space in many regions of the world and sectors.
Attractive investment themes around the globe
The global investment manager based in Toronto is convinced that the best investment ideas in the listed property segment for this year are the following sectors:
Global data centres: Data centre REITs as owners of the existing biggest portfolios are benefiting in particular from the ongoing boom in high computing power required for artificial intelligence and are therefore one of the investment focuses of Hazelview 2025. Last year, listed data centres and their operators already achieved an annual return of 23.7%.
Senior housing in North America: Supported by an ageing population in the US and Canada and a limited supply of senior housing, this segment is also one of the favourites on Hazelview’s 2025 list. Last year, performance in the healthcare sector (25.2%) benefited from this trend, giving the sector the best result of all REIT segments.
Hotels in Japan: The current occupancy of Japanese hotels, primarily with guests from other countries, has already exceeded the pre-COVID peak figures in the first half of 2024 (17.9 million guests in H1-2024 vs. 16.6 million in the first half of 2019). A favourable exchange rate of the Yen makes a visit to Japan particularly attractive for Chinese tourists.
Commercial real estate brokers: Providers such as CBRE and JLL have seen more transactions and higher turnover since last year when most of the major central banks began to cut key interest rates again. Commercial real estate brokers are also benefiting from long-term outsourcing trends and the management of properties on behalf of clients.
German and Australian residential: high rental growth an rising prices expected
Hazelview believes that German and Australian residential property will be among the five most promising investment themes in 2025. Similar to Germany, there is an imbalance between supply and demand in the country “down under” due to strong immigration.
According to calculations by the German Property Federation (ZIA), the deficit of new flats in Germany will grow to 830,000 over the next three years. The experts at Hazelview believe that rental flats in Germany will still see an annual rental growth rate of 4% due to slow pace of new construction and high demand.
“We believe that limited supply, strong demand and heavily discounted absolute valuations will help real estate companies to generate attractive returns over the next two years,” summarises Claudia Reich Floyd. The global property portfolio manager is Head of the German office of Hazelview Investments and one of the authors of the report.
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Hazelview Investments is an investor, owner, and manager of global real estate investments committed to creating value for people and places. We are an active investor, with a hands-on team that identifies opportunities to invest globally. We are committed to fostering the long-term growth of our employees, residents, and the investments we make for our clients. Our global investment and asset management team of more than 80 are located in Toronto, New York, Hong Kong and Hamburg, and we have CAD 11.7 billion (approximately EUR 7.7 billion as of 30 September 2024) of real estate assets under management. For more information, please visit the website: www.hazelview.com.