Global Real Estate Outlook 2024

Our research experts’ perspectives on the impact of economic and geopolitical trends on global real estate markets.

Our Global Real Estate Outlook in Summary

To find out more about our predictions for global real estate markets in 2024 and beyond, please explore other articles in our outlook series

“Prediction is very difficult, especially if it's about the future.” – Niels Bohr

The last few years have been humbling for forecasters trying to predict economic, financial and real estate market conditions. With that context, we share our view on what to expect in 2024.

Key 2024 Outlook themes:
  • Mixed macroeconomic picture: economic growth and fundamentals will be uneven and market specific, with risks weighted toward the first half of the year, and broader momentum likely returning as the year progresses.
  • Normalization: extreme post-pandemic highs and lows in the property sectors will transition back to historical trend lines and offer more predictable outcomes.
  • Debt in the spotlight: real estate credit strategies will remain in focus amid an elevated interest rate environment.
  • Strategic investing: balancing defensive and offensive strategies will be critical for real estate investors.
  • Flight to quality: in the broadly oversupplied office market, occupiers will face high levels of competition for prime product in high-demand segments.

The mixed macroeconomic picture

Economic conditions remain resilient heading into 2024, but the year ahead is expected to be uneven for many real estate markets and decision makers. Risks remain elevated, and signals of predictability will emerge only as the year progresses.

Markets are still contending with inflation and, in some cases, recession risk. But central banks’ progress in stemming inflation became evident towards the end of 2023. This has led to broad market sentiment that interest rates are likely at their peak; markets are anticipating central bank pivots and hoping for a soft landing. However, given the resilience of many economies globally, policy rates are expected to stay elevated well into 2024. The lagged effects of monetary tightening, geopolitical instability, and election uncertainty in major economies are creating additional potential risks to the outlook. The base case forecast is for moderating economic growth in 2024 as compared to 2023, with the prospects for recovery improving later in the year. We expect growth to be strongest among major countries in Asia Pacific, especially India. European economies – Germany in particular – are at highest risk of weak growth or even recession in the early part of the year. Meanwhile, the U.S. and Australia are forecast to see a decent, albeit below trend, pace of economic expansion. In real estate markets, however, we expect wide sector and geographic variation into the next growth cycle, as the non-synchronous adjustments of the last cycle conclude, and market participants work through current challenges.

Normalization and a return of predictability

Inflation is falling in most of the major economies around the world, meaning greater predictability is returning to consumer and producer prices – and to construction costs too, even if they will remain high. Interest rates in most developed economies have now peaked after aggressive monetary tightening in 2022 and 2023, and policy rates are likely to be stable until the cutting cycle begins in mid-to-late 2024. With future policy rate movements likely to be downward, borrowing costs will fall. Market rates may still face volatility, but the direction of travel is now downward, providing some predictability to future debt costs. Pandemic-related disruption – to consumer shopping habits, international trade, and e-commerce – have now largely settled and will bring logistics demand more in-line with historical growth trends where development pipelines are slowing in more mature markets. Office utilization has improved globally and has mostly stabilized in Asia and parts of Europe. In the U.S., return-to-office mandates have become more widespread, and we expect utilization to continue to increase incrementally in 2024, and revitalizing CBDs with renewed daytime foot traffic and retail demand.

Strategic investing

Perhaps the biggest undertaking for real estate investors in 2024 will be to balance the financial and asset management challenges within their existing portfolios, with the desire to deploy capital to in-demand assets and take advantage of opportunities over the next 12 to 24 months. A defining characteristic of successful investors will be ambidexterity: the ability to execute offensive and defensive strategies, effectively deploy resources, and make decisions with conviction in a still uncertain climate. Many investment managers are having to contend with zero-to-negative return vintages, creating additional challenges including talent retention.

To find out more about our outlook for the investment markets
Debt in the spotlight

In a market where credit remains available and active, the stability and predictability of interest rates will be more important to the improvement in investment market activity than the level of borrowing costs alone. Real estate credit strategies will remain in focus amid the elevated interest rate environment, and new sources of debt are arising to complement funding options in markets and sectors where lenders are more cautious. Given the declines in real estate values to date, there will be many situations where new equity is required to meet debt service covenants. Loan maturities, however, will catalyze transactions activity and, in some cases, distress. Increased loan originations in 2024 will provide clearer data points on property values for lenders, investors and valuers.

Sentiment that interest rates have peaked will help improve transaction volumes and stabilize pricing, but it will take time and prolonged stability in index rates to further unlock dry powder. At the start of 2024, the U.S. is furthest along in its price adjustment cycle, followed by Europe and then Asia Pacific. But the real estate market cannot be played precisely from a timing perspective. Waiting for the perfect moment to act on medium and long-term strategies risks missing out on emerging opportunities and falling behind competitors.

Sector snapshots

Opportunities for growth exist in pockets of sectors and geographical micro-markets, and there will be opportunities in distress and portfolio rebalancing efforts. For investors, the focus on diversification will take different forms in markets around the world, and even those sectors which are currently “out of favor” still have interesting segments, and a place in global, diversified portfolios.

The Living sectors will remain a bright spot in 2024 and beyond for many reasons. An expanding world population is becoming more urban, meaning cities require more homes, as well as a broader range of household types and sizes. Long-term structural trends like ageing populations, demand for education, and housing availability remain critical drivers of housing demand and will continue to benefit Living investment strategies across more markets globally. In the near-term in 2024, some markets will see distress and micro over-supply situations as interest rates and concentrated new construction in growth markets have an impact.

The growing emphasis on regionalization and local manufacturing will continue in 2024, as efforts to bring production closer to the customer and diversify supply chains broaden. The evolving global landscape of government incentives will bring new manufacturing into the advanced economies of North America and Europe, driving demand for industrial and logistics facilities. Urbanization and the evolution of consumer preferences that prioritize ever-faster delivery times will mean an intensifying focus on urban logistics. These trends will benefit not only the largest metros but the growing U.S. Sunbelt region as well.

Retail is poised for an evolving comeback in 2024. Investors are returning to a sector that earlier in the cycle transformed its supply-and-demand dynamics and its yield and rental profile to offer attractive returns and opportunities for renewed rental growth. In the U.S., high-quality, well-located retail – especially grocery-anchored – has been one of the top performing segments, with increasing investor allocations as consumers remain resilient from COVID-era stimulus amid strong job and wage growth. In Europe, the continued rebound in travel and tourism, and the return of positive real wage growth as inflation falls, will support turnover at a time of otherwise soft economic conditions. In China, the inclusion of some forms of retail into the CREIT scheme should bolster demand for retail assets; and the strong reception to India’s first retail REIT in 2023 could set the scene for rising investment into high-quality malls over the next year.

To learn more about the Global Data Center market

The global data center market is forecast to be one of the fastest-growing sectors across many geographies through to 2026, and also one undergoing continued change. The evolution of artificial intelligence (AI) from excitement and hype in 2023 into rational and strategic adoption in 2024 – within the real estate sector and beyond – will drive both an acceleration in requirements for the number of data centers, as well as changes in location, construction, and operating criteria for individual centers. For example, AI infrastructure site selection criteria favors lower energy prices and lower land costs, and facilities in the AI era will increasingly need to accommodate evolving hardware needs such as advanced cooling facilities. Navigating the emerging opportunities and risks in 2024 in this unique sector will require strategic and operational expertise.

To find out more about corporate hybrid strategies
Flight to quality

For real estate occupiers, we see 2024 as a year to further solidify workplace policies and align portfolio strategies to new ways of working and revised growth trajectories. Occupiers are working to upgrade existing facilities and refine space requirements – location, quality, design and amenities – to make the office “commute-worthy,” support return-to-office mandates, strengthen employee engagement, and ultimately drive performance. There will also be a mindset shift, as corporate real estate leaders move from operating static assets to managing dynamic workplaces, and occupancy levels and business requirements change within any given day or week. Technology will be more critical in 2024 than ever before, as organizations test and learn from AI pilots and strive to harness and leverage the wealth of workplace data across their portfolios.

One area in particular we see ramping up further in 2024 is occupiers’ focus on sustainability. More than 50% of the world’s largest companies by market capitalization have announced science-based targets that link their future building demand to a carbon commitment. Regulations and corporate disclosure requirements around sustainability are further mounting, driving companies (and investors) into greener buildings. Yet across 20 global markets, 65% of overall demand for low carbon workspace will not be met with existing stock or the current development pipeline by 2030. This presents a significant opportunity for owners or developers of sustainable buildings – especially low carbon footprint / net zero buildings – to accelerate retrofits and new developments to meet this unmet demand.

The commercial case for making buildings more sustainable

The counterintuitive challenge many companies will face, despite many global markets with rising vacancy and subdued overall demand, is that the flight to quality in offices has created strong demand concentration in the top end of most markets, which are now increasingly tight. While the new construction wave is still peaking in Asia Pacific, where demand also remains more robust, many global markets in the West (especially the U.S.) will see office deliveries slow significantly due to costs and constrained financing options, further limiting high-quality space options over the next two to three years. The likely distress and potential capital crunch for existing office assets in 2024, along with some accelerated obsolescence, will create additional risks for occupiers in the coming years. As a result, rents across the top of the market will see strong growth, with the potential for double-digit annual increases in the mid-term in the highest-quality, well-located, dynamic, and sustainable spaces. This supply-demand imbalance will create early-mover opportunities for occupiers and investors alike.

Opportunity amid challenge

While the outlook for the year ahead is complex, nuanced, and suggests uneven performance, the overriding theme in real estate markets will be one of opportunity amid the challenges. Relative stability in the macroeconomic environment will offer opportunities for investors and occupiers to execute real estate strategies that were unrealistic to implement in 2022 and 2023. While we do expect continued volatility, the extreme post-pandemic highs and lows in the sector will moderate and offer more predictable outcomes, supporting activity by actors across the real estate life cycle. Those who can manage through existing challenges and the lingering uncertainty, while making decisions with conviction and executing on longer-term strategic priorities, will have a window to excel.

In 2024, we will see the continuation of the bottoming-out phase of non-synchronous real estate cycles across geographies and sectors. Within this context, some stronger market segments with structural tailwinds are likely to power through, while 2023’s more challenged sectors search for green shoots as 2024 progresses. Geopolitics, domestic politics, and regulation will be critical to watch closely in 2024 as well. There will be more national elections in the coming year around the world than ever before.

Despite recent challenges and likely bumps in the road ahead, there are reasons for optimism as we turn the pages of our calendars to 2024. The longer-range outlook for the industry is bright as well, driven by the secular macro trends that have already been guiding the growth of the sector. The evolving future of work, increase in real estate outsourcing, continued capital flows, changing shape of urbanization, accelerating technology, and commitment to sustainability – will shape the real estate landscape for the rest of the decade.

Want to learn more?

Get in touch with our research team to find out how we can support your real estate strategy with market insights and strategic advice.

David Rea

Global Director of Macro Research & Chief Economist EMEA

Julia Georgules

Head of Americas Research

Tom Carroll

Head of EMEA Research

Roddy Allan

Chief Research Officer, Asia Pacific