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We think the outlook for global residential and commercial real estate investments is bright. With declining and constrained supply paired with rising demand, we see opportunities in sectors including logistics, data centers, and multifamily housing. Investors should focus on strategic acquisitions and diversification to capitalize on these favorable market dynamics.

The global real estate market is poised for greater activity in the year ahead, driven by lower capital costs, increased debt availability, and over USD 400 billion in private capital ready to be deployed. Although transactions had previously halved due to high leverage costs, the current environment of lower interest rates and tighter borrowing spreads should boost deal activity.

Favorable supply and demand dynamics

Robust real estate demand is meeting constrained new supply. Since COVID-19, construction activity in both commercial and residential sectors has been limited due to increased regulation and higher costs. This has resulted in a scarcity of new, quality space, even in the challenged US office market. 

These dynamics are likely to lead to decreasing vacancy rates, rising rental growth, and capital appreciation.

Investment opportunities

Both public and private real estate markets are trading at attractive yield gaps and offer good discounts, in our view. We recommend focusing on sectors with strong fundamental dynamics:

  • Commercial: Logistics properties, data centers, and telecommunication towers are well-positioned, particularly in the US and Europe, benefiting from trends like e-commerce and AI, and have barriers to entry.
  • Residential: Broad exposure to multifamily, senior, and student housing sectors is advisable, although we are less optimistic on the sector in the UK and China.
  • Retail: Selective opportunities exist, particularly in need-based retail properties.
  • Office market: Caution is advised, with a focus on prime, high-quality central office spaces, which should outperform lower-tier, older properties.

Public market performance

In listed markets, we anticipate double-digit performance overall. While US real estate companies have strong balance sheets, Singapore developers and REITs, along with Japanese and Hong Kong developers, are expected to benefit most from interest rate cuts, as we believe they have not yet fully priced in improvements compared to their US and European counterparts.

Private market strategy

In private markets, we expect similar performance. We focus on core/core-plus real estate managers capable of generating income and capital growth, particularly in our key sectors. We also favor managers who can execute opportunistic acquisitions through take-privates or joint ventures with asset owners seeking liquidity. Additionally, we see opportunities in real estate debt.

Regional variations in direct real estate

At a regional level, direct real estate investments in Canada, the US, and Continental Europe may, in our view, yield the most attractive returns owing to strong rental growth and falling interest rates. Conversely, we are less optimistic about the UK residential market because of affordability issues. In China, we foresee challenges and expect residential investments to deliver lower-than-average returns.

Watch the video

As interest rates come down and economic growth proves resilient, will the real estate market finally bottom out? And where are the best opportunities? Jonathan Woloshin, CIO Americas Equity Strategist, Real Estate & Lodging, disucsses investing in real estate in 2025.

More investment ideas

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Position for lower rates

Top investment ideas

We expect central banks to cut interest rates further in the year ahead, reducing cash returns. We believe investment grade bonds offer attractive yields and expect mid-single-digit returns in US dollar terms. Diversified fixed income strategies and equity income strategies can also help investors sustain portfolio income.

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More to go in stocks

Top investment ideas

After strong years for equities in 2023 and 2024, we see further upside in 2025. We expect the S&P 500 to reach 6,600 by the end of 2025, around 10% higher than today’s levels. Tariffs could contribute to volatility in European and Chinese markets. But we see value in maintaining diversified exposure to Asia ex-Japan. In Europe, we like small- and mid-cap stocks and Swiss high-quality dividend payers.

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Transformational innovation opportunities

Top investment ideas

We expect significant and sustained profit growth in the transformational innovation opportunities of (1) Artificial intelligence and (2) Power and resources. By investing in these areas, we believe investors can earn strong long-term returns.

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Sell further dollar strength

Top investment ideas

While the US dollar may stay well bid in the near term, we believe its valuation may now be overstretched. We recommend investors use periods of strength to reduce US dollar exposure through strategies such as hedging dollar assets, switching USD cash and fixed income exposure to other currencies, and through options.

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Go for gold

Top investment ideas

We expect gold to build on its gains in 2025. Lower interest rates, persistent geopolitical risks, and strong dollar-diversification trends likely see investor and central bank buying continue. Outside gold, we also see long-term opportunities in copper and other transition metals, with demand increasing alongside higher investment into power generation, storage, and electric transport.

Explore more of the Year Ahead 2025 report

In our base case, we expect sustained economic growth in the US, supported by healthy consumption, loose fiscal policy, and lower interest rates. Tariff threats are a headwind for Asia and Europe. If imposed, they could be partially offset by reactive stimulus measures in China. We expect growth in Europe to modestly improve as interest rates fall

A Trump presidency, coupled with Republican control of Congress, has the potential to reshape the global economic and geopolitical landscape. Key policy areas in focus for investors include tariffs, fiscal policy, deregulation, monetary policy, and international relations.

The 5Ds—debt, deglobalization, demographics, decarbonization, and digitalization—will be significant forces in the decade ahead that present opportunities and risks for investors. In aggregate, we expect them to lead to higher growth and periods of higher inflation over the long term.

Since the beginning of the decade, cash returns have struggled to surpass inflation and bonds have faced headwinds from rising interest rates. In contrast, equities have thrived, and private markets and commodities have offered robust returns. Looking ahead, we expect equities and private markets to continue to offer the highest potential returns.

Entering 2025, we believe stocks still have more to go, with our base case expectations of growth (despite tariffs), lower interest rates, and AI advancements. In fixed income, we think there is an opportunity to lock in yields for quality bonds. In currencies, while the dollar may remain strong in the short term, we believe it is looking stretched and advocate for selling it at further strength. We also like gold as a diversifier. Finally, we think the global real estate outlook looks promising.

Taking a step back, while these investment ideas present compelling cases for immediate action, developing a strategic plan that links goals with strategies can improve investors’ chance of success and help them stay focused on the bigger picture amid potential market turbulence.

We aim to provide the direction of travel for the economy and asset classes against a wide range of market outcomes ahead. The upside scenario would see lower taxes, deregulation, and trade deals adding to a positive market narrative built on solid growth and continued investment in artificial intelligence, while the risk scenario is that trade tariffs, excessive fiscal deficits, and geopolitical strife will contrib­ute to higher inflation, weaker growth, and market volatility.

Mockup of Year Ahead 2025 publication

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In this Year Ahead, we look at key developments that we believe will shape the next stage of these “Roaring 20s,” including US political change, falling interest rates, and transformational innovation in artificial intelligence and in power and resources.

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Disclaimers

Year Ahead 2025 – UBS House View
Chief Investment Office GWM  |  Investment Research

This report has been prepared by UBS AG, UBS AG London Branch, UBS Switzerland AG, UBS Financial Services Inc. (UBS FS), UBS AG Singapore Branch, UBS AG Hong Kong Branch, and UBS SuMi TRUST Wealth Management Co., Ltd.