The team at Goldman Sachs Asset Management said a real estate recovery is underway but has warned that a “painful” period of adjustment for some assets will need to be endured.
In the firm’s 2025 outlook report, titled “Reasons to Recalibrate”, it said lower rates should lead to a pick-up in deals, with lower financing costs encouraging transactions.
“A rebound in transactions can help to quantify where fair value is,” the firm said. “In our view, the discounts to net asset value at which REITs are currently trading are an indication of where investors anticipate fair value may ultimately land, although REIT discounts may be overly punitive and not reflect what private asset sales can achieve. This adjustment process may prove painful to some assets; however, we view it as a necessary step on the way to broader market recovery and greater confidence in the asset class.”
In Europe, uplifting assets and improving energy efficiency will be front of mind for asset owners, Goldman said.
“While much focus remains on distress, this is primarily the case for lower-quality assets – older, less sustainable, in less favourable locations – that may have trouble getting financing,” the report said. “These assets may offer attractive opportunities to redevelop and reposition the assets, providing an attractive entry point.”
The team added: “We believe current market dynamics present opportunities to acquire select assets at attractive prices and grow net operating income through active management and accretive capital programs. There is also scope to develop, redevelop or reposition assets to cater to changing demands for space.”
Image © SevenStorm JUHASZIMRUS/Pexels
Send feedback to Tim Burke
Follow Estates Gazette
