After several months of being on a downward trend, the real estate investment market is pointing upwards. According to the Colliers Forecasting Yields report, a positive trend is expected to begin in the first half of 2024. The report is based on a multiple regression model developed by the consultancy's Business Intelligence team.
Colliers estimates that theoretical real estate asset prices will reach their lowest point during the first half of 2024. After the first quarter of next year, the market is expected to see an improvement as intervention rates are expected to peak in that period. This will create greater certainty in the markets and open up medium-term investment opportunities, which are likely to be seized by a variety of investors.
In addition, some owners, due to debt maturities and liquidity needs, are expected to adjust their prices to adapt to this new scenario, which will contribute to reactivate investment activity.
Yield compression
2026 will be the year in which the prime yield will compress to 4.2% (-70 bps from its highs) while during the period 2024- 2025 no significant compression is expected.
Alberto Diaz, Managing Director of Capital Markets at Colliers points out that "Although the nominal values of real estate assets will not recover until after 2026, according to our model, investors who know how to take advantage of market opportunities in the first half of 2024 will be able to obtain better returns thanks to the compression of yields that will occur in the medium term and the income from rents that will grow during this period. Private investors and family offices, less tied to debt structures, will maintain their advantageous position compared to institutional investors".
"We would like to highlight that we do see a positive scenario for real estate investment starting in the first half of 2024 and that the option to delay decisions to sell core investments may be reasonable in nominal investment terms, but it will have a negative impact on investors' IRR targets and multiples in the coming years," concludes Jorge Laguna, Director of Business Intelligence at Colliers.
