BNP Paribas - Real Estate Focus, July 2023

This report focuses on the Real Estate market and how to look past the rate shock. The report notes that Real Estate markets are experiencing a modest correction, with Australia and Sweden being the most impacted due to high loan-to-value ratios and exposure to variable interest rates. However, France and the US fare better, with moderate borrowing levels and 90% exposure to long-term fixed rates. Economic stability is key to underpinning demand for Residential and Commercial Real Estate, and the current starting point is encouraging with decade highs in US, UK, and European employment. The report recommends maintaining a Neutral stance on Real Estate, with potential for a price rebound in 2024 if long-term interest rates remain low and economic activity stays stable. Value-add strategies of upgrading older Real Estate assets look appealing in this context, and the UK, Continental Europe, and Poland are more attractive regions for investment due to higher starting yields and encouraging rental growth trends. More conservative investors should look to the lower volatility European Healthcare and Residential segments, while more dynamic investors can favor an expected rebound in Industrial/Logistics demand. Overall, the report provides key points to consider for investment decisions in the Real Estate market.