DWS yield forecast
The German asset manager DWS, a subsidiary of Deutsche Bank, is forecasting a period of growth in real estate investment. After the decline in returns recorded globally in 2024, they rose by 4% in the first three quarters of last year, and this trend is expected to accelerate over the remainder of the current decade.
According to DWS estimates, average annual net returns will increase to 7.5% over the next five years, supported by rising rents and higher yields from high-quality assets. However, uniform behavior across both cities and sectors is not expected.
Cities and sectors with the greatest potential
Despite the overall recovery, local differences will be very noticeable. In particular, Miami, Atlanta, Nashville, Berlin, Madrid, London, Seoul, Sydney and Brisbane stand out as markets that are expected to achieve the highest returns over the next five years, while New York, Paris and Tokyo will offer more selective opportunities.
Residential and industrial sectors remain preferred globally, although certain areas of office and commercial real estate also present strategic opportunities. For example, U.S. retail and office real estate in North Asia or Sydney are highlighted.
Supply shortage and management strategies
According to representatives of the German asset manager, one of the key factors driving the real estate market is the supply shortage, which has led to record rental rates for both residential and office space in many cities. A common feature of almost all markets is that development activity has significantly declined in recent years. Due to risks, repricing and a sharp rise in construction costs, developers have faced difficulties launching new projects, resulting in a growing shortage of new builds and a forecast of much lower supply in the coming years with a corresponding shortage outlook.
This context may support more active management strategies – such as re-letting, refurbishment and development – aimed at delivering higher risk-adjusted returns, especially in cities and sectors where supply shortages coincide with stable demand.
Structural drivers: demographics, geopolitics and technology
According to DWS analysts, the three main factors that will shape long-term investment strategies are demographics, geopolitics and technology, beyond cyclical trends. In the company’s view, they have become “structural changes” and are transforming the way assets are invested in and developed.
As for demographic trends, they are changing demand across many sectors, but especially in housing. In this sense, post-pandemic migration and global mobility are driving growth in so-called U.S. “Sun Belt” cities (the southern part of the country), as well as in major European cities and Australia’s metropolises. This is compounded by population ageing, which is boosting demand for senior housing and health-and-wellbeing-related services, as well as an increase in foreign students and “digital nomads”.
DWS also states that global customs policy and trade restrictions are affecting logistics and manufacturing, generating growing interest in strategic urban assets, cost-efficient production hubs and key logistics facilities on both sides of the Atlantic.
Finally, technology is changing demand for office and industrial premises. In particular, artificial intelligence and automation are reducing the need for office space, but increasing demand for central, high-quality premises in global technology hubs. As a result, offices offer investment opportunities focused on repositioning, while in the industrial sector the emphasis is on modern spaces adapted for e-commerce and advanced-technology manufacturing.
Ultimately, success in real estate investment will depend on stable assets that are strategically located and prepared for demographic, technological and geopolitical trends that go beyond traditional economic cycles. How to Check a Property in Spain Before You Buy: Step-by-Step Guide
