Global real estate holdings have been reduced, with fund managers' positions falling to a 15-year low

Due to sustained pressure from high interest rates, global investors have reduced their real estate allocations to the lowest level in 15 years.

The latest global fund manager survey from Bank of America shows that a net 28% of fund managers in May are bearish on the real estate industry, a decrease of 13 percentage points from the previous month, reflecting a significant drop in market confidence in real estate.

The commercial real estate market is transitioning from ultra-low interest rates to high interest rates. The uncertainty surrounding the outlook for office buildings post-pandemic has made the market situation even more severe. The high borrowing costs in major economies have further weighed down on the real estate industry.

According to the Global Annual Real Estate Index from Morgan Stanley Capital International (MSCI), investors in the global commercial real estate industry experienced a loss of 4.1% in 2023, marking the lowest annual return since 2009.

With increasing financing costs and declining asset values, the reduction in interest rate cuts in 2024 will impact the industry's refinancing.

Oliver Salmon, Director of Global Research at FTSE Russell, stated that in the United States, there are concerns about a significant refinancing gap. Improving market sentiment requires a decrease in interest rates, and the longer interest rates continue to rise, the more difficult the "extend and pretend" strategy becomes.

Trading volumes have also slowed down. MSCI data shows that global real estate market transaction volumes have declined for seven consecutive quarters, with a year-on-year decrease of 18% in the first quarter of 2024. Many property owners are reluctant to sell their properties, locking in significant losses and hoping for a rebound in the market in the near future.

Fund managers are shifting from real estate to consumer stocks, bonds, and cash to cope with market uncertainty