Real Estate Funds Gain Shine as Interest Rates Normalize

The real estate sector is witnessing a significant shift in momentum following a challenging period. Companies dedicated to renting out buildings, warehouses, and shopping centers have revised their profit estimates upward, signaling a recovery. The difficult year of 2022, which cast a shadow over the industry, is now viewed as a distant memory rather than a current constraint.

Investment managers are increasingly highlighting this asset class as a viable option for the coming year. The focus is on 2026 as a year where these investments can play a crucial role in balanced portfolios. The renewed interest is driven by a changing economic landscape where the volatility that previously deterred investors is beginning to subside.

At the heart of this resurgence is the normalization of interest rates. The sector comprising SOCIMIs in Spain and REITs internationally is described as being tremendously sensitive to monetary policy. When rates rise abruptly, as they did in 2022 to fight inflation, the financial statements of these companies take a heavy hit. Conversely, stabilizing rates provide a favorable environment for growth.

Specialized fund managers emphasize this relationship when advising clients. The mechanism is straightforward:

• Higher interest rates increase borrowing costs for property-heavy companies.
• Investors shift capital to safer, yield-bearing assets.
• Real estate valuations face downward pressure.

However, as the economic climate shifts, these pressures are alleviating, allowing the sector to regain its shine.

For investors looking to enter the property market without the complexities of direct ownership, these funds offer a compelling solution. They provide exposure to real estate assets through the stock market, offering liquidity and diversification that direct property investment cannot match. This accessibility is a key factor in their growing appeal.

Managers are actively defending this typology of asset as a strategic allocation. By investing in these vehicles, individuals can gain access to a portfolio of commercial properties managed by professionals. The recommendation to include these assets in 2026 portfolios suggests a strong belief in the sector's continued recovery and its ability to generate returns in the current economic cycle.

Industry experts provide insight into the mechanics of the sector's performance. Josep Prats, a fund manager at Abante Asesores, offers a clear analysis of the situation. He notes the direct correlation between monetary policy and the financial health of these companies.

According to Prats, "the sector of the socimis is tremendously sensitive to the monetary policy, and a sudden rise in interest rates, like the one experienced in 2022 to combat inflation, ends up hitting the accounts of this type of company hard." This statement underscores the delicate balance these firms maintain with macroeconomic trends.