Schroders favours UK for near-term real estate investment

Schroders Capital expects 2024 and 2025 to be attractive years for new investments in real estate, particularly across the UK and Nordics regions. In its investment outlook report, the asset manager has suggested real estate will provide a tailwind for private market investments in the short to mid term after significant valuation corrections have occurred and interest rates have stabilised. Schroders said immediate real estate investment opportunities are starting to arise in selected parts of the markets where strong fundamentals prevail. The report said occupational markets across the UK and the Nordics remain robust, with growth predicted in most real estate sectors, particularly those driven by favourable structural trends. In addition, rental income levels are expected to continue to tick up, driven by tight supply alongside increased construction and debt finance costs. The lack of high-quality ESG-compliant spaces are also expected to help stimulate rental growth post-economic recovery. Nils Rode, chief investment officer at Schroders Capital, said: “The current environment reinforces our focus on operational excellence to ensure long-term, sustainable income and investment outperformance. We believe all real estate has become operational, aligning the financial outcome of investments with the success of tenants’ businesses within these assets. “While our private market investment outlook is generally positive and has not changed materially from prior quarters, we believe that given ongoing geopolitical risks and domestic political tensions, as well as escalation risks from ongoing conflicts, it’s essential to maintain high selectivity and robust diversification within private market allocations.”