Few asset classes have divided as sharply along geographic lines this year as listed real estate. In EUR terms, US REITs have climbed 18% – around 4 percentage points ahead of the broader equity market – while Nordic property has fallen around 11%, with Europe up 2% and Asia Pacific down 2%. This dispersion illustrates how real estate remains driven largely by local factors and the benefits of holding a globally diversified portfolio. This is underlined by a similarly broad spread across segments. In USD terms, data centres (+32%) are the strongest performer this year, benefiting from AI-driven demand and constrained new supply, while offices (+3%) are among the weakest as investors weigh what AI might mean for white-collar employment[1].
This has presented headwinds for SKAGEN m2 which is significantly underweight US and overweight Europe versus the benchmark, notably in Sweden where the portfolio has record exposure of around 18%. After a strong 2025 when the fund outperformed the MSCI ACWI IMI Real Estate Index by over seven percentage points, it currently lags by around six percentage points year-to-date. The fragmented market is also reflected at a company level. Data centre operator Equinix, Africa-focused tower company Helios Towers and US mall owner Macerich have been our top three contributors this year, while Europe provides four of the five largest detractors.
Improving fundamentals not reflected in valuations
The dispersion in returns between different geographies is also evident in valuations. While US real estate is priced at a 7% premium versus its long-term average, the European market has de-rated materially and trades at a rarely seen discount of 22%[2]. Sweden, in particular, is historically cheap. The market is currently priced at a discount of around 45% to net reinvestment value, compared to a ten-year average discount of around 11%, with multiples implying a further 20% fall in property prices which is at odds with the improving outlook. Financing is widely available, real estate values are rising, and companies have now delivered eight consecutive quarters of cash earnings growth, suggesting that current valuations offer downside protection and positive re-pricing potential.
More widely, listed real estate appears to be in the growth phase of its current cycle. Earnings and cashflow are rising, demand and supply dynamics favourable, and balance sheets appear healthy – positive factors which valuations currently ignore. Macro factors are also broadly favourable. Despite geopolitical tensions, inflation is expected to fall and asset prices already reflect expectations for higher interest rates.
A diversified and discounted portfolio
SKAGEN m2 has had a busy year of activity with nine holdings exited so far and three new investments – Australian logistics developer Goodman Group, Japanese diversified group Mitsui Fudosan and Indonesian developer Pakuwon Jati – with each offering a combination of structural demand and attractive pricing. This portfolio now consists of 32 companies with the top ten accounting for 43% of assets. The fund is also well-positioned for an uncertain outlook with holdings tilted towards defensive growth and diversified across sub-segments, geographies and risk factors.
Its valuation also offers attractive downside protection as well as upside potential, trading at a discount to the market on multiples of book value, cash flow and earnings. The portfolio’s dividend yield remains slightly lower than the benchmark due to its holdings typically reinvesting earnings to finance future growth.
The discounted pricing doesn’t compromise balance sheet strength. Portfolio holdings have conservative ratios of interest coverage (3.3x) and loan-to-value (43%) with a weighted average loan maturity of around four years. They are also largely protected against rising interest rates with 75% of debt at fixed interest rates.
Looking ahead, we expect the long-awaited recovery for global listed real estate to continue. Although momentum stalled following the start of the Iran conflict, the underlying fundamentals of the asset class and earnings growth continue to improve. At a sector level, the upturn is likely to remain uneven with continued dispersion between structurally challenged segments like offices and supported ones such as data centres, logistics and health care where we have good portfolio exposure. The recovery will also remain fragmented across geographies. While the US has already seen valuations reflect earnings growth, pricing in Europe, and particularly Scandinavia, is still to catch up with operational progress.
This dispersion should be supportive for our diversified, value-focused and bottom-up approach. We continue to believe that selectively investing in resilient companies that combine strong balance sheets with earnings growth in structurally attractive segments, offers investors the best exposure to the real estate recovery.
A replay of our recent SKAGEN m2 webinar is available here: Market update with SKAGEN m2 - YouTube
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All information as at 31/08/2026 unless stated.
[1] MSCI US REIT, MSCI USA, MSCI AC AP Real Estate, FTSE E/N Dev Europe and Carnegie Real Estate indices.
[2] Source: Worldscope, I/B/E/S, Datastream, UBS estimates as at 25/08/2026.