CEO Outlook Summit 2025: real estate is attractive again

It has been a bumpy start to the year, but brave investors who deploy capital in real estate, especially in retail, will be rewarded, delegates heard at Real Asset Media´s CEO Outlook Summit 2025, which took place yesterday at RSM’s offices in London.

“Now is the time to act”, said Sabina Reeves, Chief Economist and Head of Insights & Intelligence, CBRE IM. “We should be optimistic but realistic. It takes bravery in the current uncertain geopolitical context, and it will be a slow burn recovery for real estate. But it’s an income-driven, reliable sector that has a real part to play in multi-asset investors’ portfolios.”

CBRE IM’s forecast for institutional-quality real estate is for total returns of 7.5% in Continental Europe, 8.1% in the UK, 7.8% in the US and 6.6% in Asia-Pacific. “You come to Europe for value”, said Reeves. “Keep in mind that bond yields are 3%.”

The optimistic outlook for real estate is driven by the fact that income returns are attractive. “It is an income-driven return, and steady reliable income is what people invest in real estate for”, said Reeves. “Higher-income producing sectors will do well.”

The logistics and living sectors look good value, but they are low-yielding. Multi-asset investors are likely to opt for higher return segments.

“This is when retail pops up”, she said. “My prediction is that retail as a platform will be the biggest sector this year for the first time since 2014.”

Very few segments offer sustained real rental growth, once inflation has been taken into account, while yields have reached their peak in every sector, except legacy offices.

“Moves will be minimal, because we don’t expect bond yields coming down that much in the next few years, so the real estate sector shouldn’t be looking for a lot of help from the bond market”, Reeves said. “Returns will peak because yields will start to come in, so now is the time to act.”

The real estate market is looking at a year of incremental improvement rather than a rocket fuel recovery. Valuations have reset but liquidity is still impaired, and the macroeconomic picture remains challenging. 

Three main themes are dominating the macro context, according to CBRE IM: the first is global growth divergence, as the US is outstripping Europe, which is stagnating and characterised by low productivity and a shrinking working age population.

The second theme is sticky inflation and tight labour markets, as deglobalisation and demographic trends act as a brake. The third key theme is that sovereign risk is under increasing scrutiny. “Now quantitative easing is over, we have quantitative tightening”, she said.

CBRE IM is overweight on the US, the UK and Japan and underweight in China and Continental Europe, but according to Reeves “Europe will soon start to look interesting again.”