Craig Wright, Head of European Research and Catriona Macnair, and investment director at abrdn, shares his thoughts on finding opportunities in the global real estate landscape.
Craig Wright stated “Despite the gloom and doom being felt across global real estate currently, there are pockets of optimism and opportunity to be found. Real estate investors who focus purely on developed markets may miss the chance to diversify their portfolios and benefit from different market conditions in other areas of the world.
“One area of strong performance and still showing significant growth potential is industrial warehousing in Mexico. Trade tensions and deteriorating relations between the US and China, as well as supply-chain dislocations, have resulted in strong tenant demand for warehouse space near the US border in Mexico, as companies aim to bring their supply chains closer to home. This ‘near-shoring’ or ‘friend-shoring’ trend has seen outstanding performance in the industrial warehouse business in Mexico. Warehouses are currently running at very high occupancy rates and the pipeline for growth looks strong. This trend is not unique to Mexico and can be seen in many parts of the world where deglobalisation is leading to the formation of new supply-chain networks.
“Homebuilders in Brazil are also ones to watch as they are likely to enjoy an uptick over the coming period. The new government under President Lulu is likely to introduce policies that are favourable to homebuilders, as this would have popular support. In addition, building development is highly sensitive to interest rates, with any fall in rates generally supportive. Currently in Brazil, interest rates are at 14%, but as inflation in the country is falling rapidly, now at 5%, a rate-cutting cycle appears to be imminent. This could be beneficial for real estate developers in Brazil.
“Meanwhile, in China, the past two years have been extremely turbulent in real estate, but the outlook is now turning a corner. Real estate investing is far too big a sector for Chinese policymakers to ignore, as Chinese households invest an enormous 65% of their wealth into real estate – compared with 35% in Taiwan and 22% in the US. There has already been support from the Chinese government to the biggest real estate developers and there is likely to be further stimulus in this sector in the months ahead. As a result, we are upgrading our outlook for Chinese Listed real estate property companies.
“As with new opportunities in all emerging markets, investing requires thorough due diligence and careful sifting for the most investable companies. Our aim is to find those companies that have robust cashflows and can survive the inevitable cycles, and we believe there are currently excellent opportunities to be found all over the globe.”