NEW YORK--(BUSINESS WIRE)--DWS Group today released its U.S. Real Estate Strategic Outlook for 2019. In the report, DWS notes that continued economic growth and a moderate pipeline of new supply will be key drivers of the market in the short term. Rising interest rates and a flattening yield curve make the medium-term outlook more uncertain.
“The underlying fundamentals of the real estate market remain healthy. Therefore, our view is it is too early to batten down the hatches, shunning growth oriented sectors, markets, and assets that can thrive amid strong fundamentals,” said Todd Henderson, Head of Real Estate for the Americas at DWS. “However, we acknowledge we are late in the economic cycle and are managing risk across the portfolio accordingly.”
The report also includes a breakdown of DWS’s sector allocation, as well as various factors impacting the outlook and strategy on each, such as:
- Industrials (Overweight): Market fundamentals in the U.S. are expected to remain strong for the next two years due to several factors including low current vacancy rates, a disciplined construction pipeline and the proliferation of e-commerce.
- Apartments (Market-weight): Favorable macro trends should sustain healthy renter demand. Combined with the signs that the supply pipeline is abating, the apartment sector should return to positive net operating income growth. It is unlikely that absorption can offset the sizeable pipeline of new supply.
- Retail (Underweight): Though the sector remains under duress due to the boon in e-commerce, it’s kept a float by strong consumer fundamentals and service-oriented retailing. Going forward however, economic fundamentals that underpin consumer spending may not be as favorable and could put pressure on discretionary spending.
- Offices (Underweight): Performance is expected to continue with modest growth, though the high cap-ex burden, a trend toward densification, and persistently low cap rates create risk and return imbalances.
“In a mature phase of the cycle, we are adopting sector allocations with a keener eye toward risk. As we continue to monitor various trends and developments impacting the markets, we’re constantly analyzing our exposure to certain sectors to ensure we’re minimizing risks while generating the best returns for investors,” Henderson said.
DWS Group (DWS) is one of the world's leading asset managers with USD 757.9bn of assets under management (as of 31 December 2018). Building on more than 60 years of experience and a reputation for excellence in Germany and across Europe, DWS has come to be recognized by clients globally as a trusted source for integrated investment solutions, stability and innovation across a full spectrum of investment disciplines.
We offer individuals and institutions access to our strong investment capabilities across all major asset classes and solutions aligned to growth trends. Our diverse expertise in Active, Passive and Alternatives asset management – as well as our deep environmental, social and governance focus – complement each other when creating targeted solutions for our clients. Our expertise and on-the-ground-knowledge of our economists, research analysts and investment professionals are brought together in one consistent global CIO View, which guides our strategic investment approach.
DWS wants to innovate and shape the future of investing: with approximately 3,600 employees in offices all over the world, we are local while being one global team.
For informational purposes only, not a recommendation or endorsement of a specific security.
The brand DWS represents DWS Groups GmbH & Co. KGaA and any of its subsidiaries such as DWS Distributors, Inc. which offers investment products or DWS Investment Management Americas Inc. and RREEF Americas L.L.C. which offer advisory services.
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