In our 2023 end-of-year update, we warned of geopolitical risk remaining a global disruptor. As we write 2024’s update, we still see geopolitical stress as the main headwind facing global markets in 2025, including real estate.
Trump’s approach to tariffs, the Russia-Ukraine war, conflicts in the Middle East and European political volatility will continue to weigh on the mind of all investors. Deglobalisation is no longer a predicted trend but a harsh certainty, and just as globalisation proved deflationary, we expect its reversal to prove inflationary.
Government deficits and extensive national debt levels are also causing concern and could lead to unexpected shocks to markets. These factors have serious implications for monetary policy globally, as central banks weigh up the choice between fighting rising prices and supporting flagging economies.
That said, inflationary levels are much lower now than in 2022/23 and major central banks have started to cut rates. However, we should accept that inflation is likely to display volatility, with higher levels than we became accustomed to in the post-GFC era of quantitative easing. The same is therefore true with interest rates.
While this has major implications for the cost of capital, it is fair to say that certain real estate sectors should benefit by offering inflation protection and value growth. We see our preferred sectors – UK Living & Storage – as offering the best risk-adjusted opportunities.
A lack of clarity will lead many investors to sit on the sidelines, reducing competition for investment opportunities. As such, for experienced investors with capital available to deploy, the window to invest continues.
After 29 years as a value-add private equity real estate investment manager, we have faced many economic and real estate cycles and taken advantage of disruption and emerging sectors, so the future continues to hold exciting opportunity for the Moorfield team and its partners.
No doubt 2025 will continue to deliver us all a myriad of challenges – but we are confident that Moorfield will ‘thrive in 25’… and beyond.