A global fund manager anticipates the performance of the commercial property sector, and in particular listed real estate investment trusts (REIT), will significantly improve in 2025 after two years of decline in the face of rising interest rates.
Janus Henderson Investors has based its forecast on the perception the market has reached its lowest point for most types of property, marking the beginning of a new cycle for the asset class.
“Valuations have largely been reset and transaction volumes are increasing, with a greater breadth and depth of demand across investment markets,” Janus Henderson Investors co-head of global property equities Guy Barnard noted.
“Higher transaction volumes should result in a firming and eventual increase of asset values.”
Barnard was particularly optimistic about listed REITs and their ability to lead the commercial property recovery and recognised some companies making up the underlying assets of these offerings had already experienced positive outcomes.
“Companies from property sectors that have benefited from structural trends, employed lower leverage (debt) and enjoyed an advantage in terms of cost and access to capital, with a pathway for growth have seen share price appreciation from the market,” he explained.
In addition, he acknowledged listed REITs have continued to provide defensive and growing cash flows and dividends.
“The underlying operational fundamentals of many businesses remain robust, with occupancy high and rents rising. These factors can enable further cash-flow and dividend growth in the year ahead,” he said.
According to Barnard, all of these factors point towards a commercial property revival for the coming year as listed REITs have now been more accurately priced.
“Underlying real estate fundamentals remain steady; coupled with new growth opportunities ahead for the listed REIT sector, we believe the asset class can continue to outperform other forms of property ownership,” he pointed out.
“High and growing dividend yields, defensive income streams and diversification versus the wider equity market all support an allocation within a balanced portfolio.”
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