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Recession ahead but prime buildings seen holding ground



Difficult times in the global economy will continue in the first half of next year though good quality real estate will perform well, according to Macquarie Asset Management.


In a 2023 outlook report, the Sydney based group said that a global recovery is expected in the second half of the year, adding that recessions are coming but so are recoveries.


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Recovery from recession

“With inflation eroding real incomes and interest rates rising sharply, recessions are likely in early 2023. But the US, UK, and European economies should all be recovering in the second half of the year,” according to Macquarie Asset Management., which manages some $A800 billion of assets globally.


“With China likely to accelerate steadily through the year as policy easing steps up a gear, the global economic landscape should be much improved towards the end of 2023”, it added.


In a look at the sectors, infrastructure is seen as being a standout. It offers inflation protection, defensiveness, high yield, and exposure to structural growth drivers to investors, said the report.


 

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“Agriculture, with its inflation hedge characteristics and consistent return delivery, also looks attractive to us. The rise in interest rates globally means the near-term outlook for real estate is more challenging. High-quality buildings with healthy cash flows and premium tenants, and assets in attractive locations where there are demand-supply imbalances, should continue to perform solidly,” it added.


Energy swap is key

On the energy front, the switch over to a renewables-based electricity system is seen as being cheaper and more secure than a fossil fuels-based system.


“The global energy crisis has brought concerns about energy security and cost to the fore for consumers, businesses and governments alike,” said the company.


“A renewables-based energy system is likely to be both more secure and cheaper than a fossil fuels-based system, so recent developments should ultimately accelerate the transition to a low-carbon energy system,” it added.


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