Morgan Stanley IM: 2025 Real Estate Mid-Year Outlook

Within this macro backdrop, real estate looks durable and downside-protected, particularly in sectors that are supported by long-term structural trends. Several factors suggest this is an attractive time to invest in real estate: meaningful downward re-pricing (20 to 25% across regions) which enables an attractive entry basis, positive core returns across regions for the past four quarters suggesting the market has bottomed and the next up cycle has begun, and significantly lower new supply due to the pullback in construction starts which will be supportive of fundamentals.

^{Risk Considerations: Historical performance information is not indicative of future results. Alternative investments are speculative and include a high degree of risk. Investors could lose all, or a substantial amount, of their investment. Alternative instruments are suitable only for long-term investors willing to forgo liquidity and put capital at risk for an indefinite period of time. Alternative investments are typically highly illiquid—there is no secondary market for private funds, and there may be restrictions on redemptions or the assignment or other transfer of investments in private funds. Alternative investments often utilize leverage and other speculative practices that may increase volatility and risk of loss. Financial intermediaries are required to satisfy themselves that the information in this document is suitable for any person to whom they provide this document in view of that person's circumstances and purpose. Morgan Stanley Investment Management (MSIM), its affiliates and its and their respective directors, officers, members, partners, employees, agents, advisors, representatives, heirs, and successors shall have no liability whatsoever with respect to any person's or entity's receipt, use of or reliance upon this document or any information contained herein. If such a person considers an investment, she/he should always ensure that she/he has satisfied herself/himself that she/he has been properly advised by that financial intermediary about the suitability of an investment.}

^{ESG Strategies that incorporate impact investing and/or Environmental, Social and Governance (ESG) factors could result in relative investment performance deviating from other strategies or broad market benchmarks, depending on whether such sectors or investments are in or out of favor in the market. As a result, there is no assurance ESG strategies could result in more favorable investment performance.}

^{Real estate investments are subject to risks similar to those associated with the direct ownership of real estate and they are sensitive to such factors as management skills and changes in tax laws.}