Hazelview Investments expects continued rebound for key real estate segments
Last year saw mixed fortunes for the real estate investment trust market with the first half of 2024 challenged by a prolonged downturn while the second half gained some positive momentum.
Canadian REITS, particularly those focused on senior housing, are poised for strong growth in 2025 with Hazelview Investments expecting that this segment of the real estate market (thanks to a growing population of seniors) along with data centres (driven by AI’s expansion) will offer above-average investment opportunities in Canada.
Hazelview has today published its 2025 Global Public Real Estate Outlook Report which suggests 2025 will build on the rebound that began in Canada towards the end of last summer thanks to interest rate cuts, return to office mandates, and growing market confidence.
That said, the Fed’s cautious tone on US rate cuts as the year drew to a close saw a pullback which erased some of the year’s gains but not enough to destroy a positive year-end return driven by high occupancy rates and low supply rates across core property types.
The global REIT market posting an average return of 4.6% led by Australia (10.6%) and the US (7.9%) and including positive returns for Japan (2.6%), Canada (1.1%), and Continental Europe (0.6%). This was offset by negatives for Singapore (-8.3%), Hong Kong (-10.8%), and the UK (-11.6%).
Hazelview expects these factors to continue to fuel the REITs market in 2025 while their multi-year strategy of reducing leverage has positioned them well in the current economic climate with the ability to capitalize on their lower cost of capital for strategic acquisitions and debt management.
REITS are trading at their most favourable valuations relative to global equities in decades and Hazelview says that they are still undervalued compared to their intrinsic value which should entice investors and provide potential for positive returns.
"The global REIT market has reached a pivotal moment, demonstrating resilience and potential for substantial gains," said Corrado Russo, chief investment officer & head of Global Securities at Hazelview Investments. "With strategic active management and a keen focus on sectors poised for growth, 2025 presents an expansive landscape for investors.”
Five key themes for REITS
The firm’s outlook includes five key themes for REITS in 2025:
- Global Data Centres: Driven by digital transformation and AI, demand for data centres is expected to surge.
- Senior Housing in North America: An aging population and limited new developments make this a key area for growth.
- Hotels in Japan: With tourism recovering and new hotel supply steadily declining this sector is well positioned for outperformance in 2025.
- Commercial Real Estate Brokers: Set to benefit from increased transaction volumes and a trend towards the outsourcing of property management services.
- Residential Real Estate in Australia and Germany: Strong rental growth and supply-demand imbalances present opportunities.
"We are prepared to navigate through the complexities of the current economic environment to identify and leverage long-term growth trends," stated Samuel Sahn, managing partner & portfolio manager. "Our commitment to active management allows us to adapt swiftly and effectively, ensuring sustainable success for our partners and clients."
