Opportunities for the global real estate sector in Italy: FundsPeople explore
Analysis by Geoffrey Dybas, portfolio manager of the Nordea Global Real Estate fund, on the global real estate market, opportunities and some challenges.
The global real estate market is extremely diverse. There is a wide variety of offers from companies trading in this market. After all, consider the 22 developed countries, emerging economies and more than 16 segments where investment opportunities can be found. "Real estate offers many distinct opportunities in both the core segment (offices, retail, residential, industrial buildings and hotels) and the non-core segment (data centers, transmitters, student dormitories, single-family rental homes, modular homes, storage, REITs, healthcare facilities, nursing homes)," says Geoffrey Dybas, portfolio manager of the Nordea 1 - Global Real Estate fund.
In addition, the different cycles of the industry, spanning different geographic regions and economic cycles, need to be taken into account, according to the expert. Each of these markets can operate in different fiscal and monetary policy contexts.
Focus on Chinese and European markets
As you know, the European Central Bank has just lowered its GDP forecasts. "Every time one of the largest economies slows down, it can put pressure on global growth and further impact its trading partners. If this effect helps to reduce the inflation levels that several central banks have been trying to combat, it could relieve pressure and reduce the need for further interest rate hikes, leading to a search for investment opportunities in the stock market, which may have been hit too hard by the rate hikes," admits the Nordea AM expert.
We believe that the global listed real estate market should definitely be considered. Dybas continues, explaining that if we look at Europe today, we can see that France and Germany have lower composite PMI readings than the eurozone, respectively 43.5 and 46.2 compared to 47.1 (end-September 2023 data). "You can see how the major economies of the Old World interact and affect the whole system," he says.
It's also worth keeping a close eye on the East.
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0There are still opportunities.Look at the data. The global listed real estate market lagged global equity markets during the year, as shown by the FTSE EPRA Developed index compared to the MSCI World index. Only the data center segment outperformed the MSCI World index through Sept. 22. "Note that although the largest companies in the real estate segments under consideration, including data centers (Equinix and Digital Realty Trust) and industrial warehouses (ProLogis), are listed in the US, these are global companies," comments the portfolio manager.
Therefore, as the expert notes, the real share of the U.S. is lower than one might assume, looking at the percentage distribution of market capitalization of national stock markets (62.6% of the FTSE EPRA Developed index as of September 22). "With leading central banks avoiding further interest rate hikes this quarter and being more data-driven, the overweighting of the MSCI World index over the global listed real estate market and the discount at which the sector is now trading, we believe the global listed real estate market should be considered," he concludes.
Look at the data. The global listed real estate market lagged global equity markets during the year, as shown by the FTSE EPRA Developed index compared to the MSCI World index. Only the data center segment outperformed the MSCI World index through Sept. 22. "Note that although the largest companies in the real estate segments under consideration, including data centers (Equinix and Digital Realty Trust) and industrial warehouses (ProLogis), are listed in the US, these are global companies," comments the portfolio manager.
Therefore, as the expert notes, the real share of the U.S. is lower than one might assume, looking at the percentage distribution of market capitalization of national stock markets (62.6% of the FTSE EPRA Developed index as of September 22). "With leading central banks avoiding further interest rate hikes this quarter and being more data-driven, the overweighting of the MSCI World index over the global listed real estate market and the discount at which the sector is now trading, we believe the global listed real estate market should be considered," he concludes.
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