A new report from Crestbridge indicates a prevailing optimism among real estate managers, who are expected to largely maintain their asset allocations within the sector for 2024, despite the challenges faced last year.
This is reflected in the score for real estate and infrastructure in the latest Crestbridge Alternative Managers' Mood Index (CAMMI), which asks asset managers how they intend to treat their asset allocations over the next 12 months – whether to decrease, increase or maintain them.
The Index score fell to 42.86 in December 2023 from 50 in March 2023, recording a slight drop of 7.14 points, suggesting a contraction in the asset class but overall stability.
Operational efficiency
The report found that, despite challenges, real estate has its bright spots. Operational efficiency, as well as regulation and compliance, are also high on the agenda for real estate managers.
The report also notes that concern for talent management has lessened among managers, suggesting a shift in priorities towards operational savings over team expansion.
Real estate is among several asset classes to contract in sentiment in the latest CAMMI report, taking the overall CAMMI score across all alternative asset classes to 42.37.
Positives for real estate
Dean Hodcroft (pictured), CEO for Crestbridge, said: “Despite last year’s dual challenge of rising interest rates and pressure on real estate prices, the sector showed remarkable resilience.
"This year, with interest rates flattening off and the forward interest rate curve trending downwards, we're entering a phase that could reinvigorate the market.
"This new environment, coupled with valuation stresses, may create a more favourable leverage scenario, enticing buyers and helping the refinancing markets.
“Amidst the headwinds, the real estate and infrastructure sectors are finding new paths to growth. The agility and deep market understanding of managers are key in this environment.
"While some traditional asset classes are under pressure, dynamic sectors such as e-commerce logistics, adaptable office spaces and life sciences are gaining traction. It's this adaptability and resilience that will chart the course for real estate's future.”
• The full CAMMI study can be found here