The real estate asset manager addresses the trends set to shape the next 12 months
With the new year upon us, PGIM Real Estate turns attention to the investment trends they expect to influence market conditions and investment performance in 2020 and beyond.
PGIM Real Estate identifies four key global trends that are set to have a significant aggregate impact, and ten region-specific trends that reflect opportunities to benefit from diversification by strategy and geography.
In absence of a more pronounced economic downturn, real estate markets look set to deliver another year of decent, if not spectacular returns. Take a closer look, though, and the defining themes identified for 2020 vary quite significantly by geography.
One common theme is that even where there is set to be slowing demand for office space — and increased uncertainty owing to flexible office providers — space absorption is set to remain positive and vacancy rates are low enough to support further rental growth given limited supply pipelines.
There are going to be plenty of challenges for investors too. Changes in the way real estate spaces are used continue apace, resulting in rising density and shifting tenant expectations. In many Asian markets, following a sustained period of rental growth, affordability of office space is becoming stretched.
Elsewhere, retail markets are suffering, in Europe for example, and policy decisions have a role to play. In both Europe and the United States, an increased regulatory burden is dampening an otherwise bright outlook for the apartment sector.
Overall, 2020 is set to be a year in which aggregate performance remains steady, despite the ongoing threat that the current cycle — which cannot go on forever — simply comes to an end.