Artificial intelligence (AI) is revolutionising entire industries and threatening to upend the job market—and the digital world seems to be growing faster than the real one. Amidst this uncertainty, where should investors direct their attention?
In recent years the answer to this question has seemed simple. Technology has been the main show in town, with a handful of companies driving the market. In 2024, the handful of tech companies dubbed the ‘Magnificent 7’ accounted for over half of the S&P 500’s total return. But things are shifting. Volatility hit the sector in early 2025, with tech stocks pulling back, losing their lustre a little after a spectacular bull run.
This has offered headspace for investors to look at other sectors, and the case for real estate has never been stronger. Because no matter how advanced AI becomes, we still need places to live, work, and play.
The original store of value
Remember Maslow’s hierarchy of needs? The pyramid that explains what drives human behaviour, from basic survival to self-fulfilment? Real estate touches every level of that pyramid. The spaces we inhabit influence creativity, productivity, and well-being. This is evident today in the office market, where demand for high-spec, beautifully designed spaces is surging, while tired old buildings languish unoccupied. As Winston Churchill said, “We shape our buildings; thereafter they shape us.”
Yet, while the demand for quality property remains constant, the investment landscape is ever-changing. During the past 20 years, TR Property Investment Trust’s investment universe of pan-European real estate equites has experienced three major bear markets: the global financial crisis (GFC) of 2007 to 2008; the Covid-19 pandemic and its resultant interest rate hikes; and the onset of the Ukraine conflict
Research from the European Public Real Estate Association (EPRA) shows how listed real estate has held up during these challenges. Between 2006 and 2022, European stocks produced an average annual total return of 7.01 percent, and government bonds 2.27 percent. This compared with diversified listed real estate which produced a 4.79 percent total return. There was, however, significant performance variance across property sub-sectors, with stronger average returns from the office and industrial sectors (6.78 and 5.83 percent respectively) with retail the laggard, at 0.73 percent.
This divergence highlights the critical challenge for investors: real estate may always be essential, but not all property investments will thrive equally. As the market evolves, understanding the forces driving change is crucial—none more so than technology.
The influence of technology on property
Technology is redefining the fundamentals of demand. Many long-term trends—like the shift to online shopping and the rise of remote working—accelerated dramatically during the pandemic. The ongoing impact of this transformation is still playing out across the real estate investment landscape.
MSCI data shows that UK retail warehousing, essentially a play on the spaces where our online orders are executed, delivered a 12.5 per cent total return in 2024, making it the leading real estate sub-sector. Ironically, shopping centres came in second with a 10.5 per cent total return, proving that despite the rise of online shopping, bricks-and-mortar retail isn’t dead, just evolving.
Perhaps the most obvious route for property investors to get exposure to the insatiable demand for AI-based tech is via data centres. These assets are fast-becoming crucial infrastructure, drawing serious investment.
Meanwhile, office space is undergoing a dramatic transformation. The days of generic office blocks in uninspiring locations are numbered. Employees, who thanks to technology, now have more power over whether they make the journey to work or not, demand premium spaces, and landlords face mounting pressure to meet environmental standards. As overall demand for office space has fallen, the gap between the best and the rest is the key for investors to focus on. London is a perfect microcosm of this: West End rents have hit record-breaking levels, while in Docklands, excess supply and ageing buildings have pushed rents to rock-bottom levels.
The fundamentals still matter
Unlike tech stocks, where dominance can shift overnight and valuations are largely based on theoretical future breakthroughs, real estate has a unique characteristic—absolute scarcity. Land is a finite resource. We can’t print, mine, or generate more of it. This inherent limitation means that well-located, high-quality properties will always be in demand.
Unlike tech stocks, where dominance can shift overnight and valuations are largely based on theoretical future breakthroughs, real estate has a unique characteristic—absolute scarcity. Land is a finite resource. We can’t print, mine, or generate more of it. This inherent limitation means that well-located, high-quality properties will always be in demand.
One investment, many opportunities
For investors looking for exposure to real estate, TR Property Investment Trust offers a compelling opportunity. While many real estate investment trusts (REITs) focus on a single property sector, we offer investors diversified exposure to the highest quality REITs, developers, and landlords across the UK and Europe. We have beaten our benchmark in 12 of the last 13 years, and the dividend we pay shareholders has increased each year—despite a challenging market backdrop.
Have you ever noticed how even the iconic technology stories of our age are always rooted in real estate? Steve Jobs founded Apple from a bedroom in his childhood home, Jeff Bezos first dispatched books from his garage, and Mark Zuckerberg dreamt up Facebook from his university dorm room. As these firms grew, they needed headquarters, flagship stores, warehouses, and data centres. No matter how digital the economy becomes, it all comes back to physical space.
AI might be rewriting the rules of business, but even robots need real estate.
About TR Property Investment Trust
TR Property Investment Trust is listed on the London Stock Exchange (ticker: TRY). The trust was set up as an investment trust in 1905 and has focused solely on the property sector since 1984. It offers diverse exposure to the UK and European property market, primarily through real estate equities and via a small proportion of UK physical assets, seeking long-term capital growth and a growing dividend. TR Property’s core management team has worked together for more than 20 years, led by fund manager Marcus Phayre-Mudge.
Capital at risk. TR Property Investment Trust PLC is an investment trust and its Ordinary Shares are traded on the main market of the London Stock Exchange. The Investor Disclosure Document, Key Information Document (KID), latest annual or interim reports and the applicable terms & conditions are available from Columbia Threadneedle Investments at Cannon Place, 78 Cannon Street, London EC4N 6AG, your financial advisor and/or on our website www.columbiathreadneedle.com. Please read the Investor Disclosure Document before taking any investment decision. The information provided in the marketing material does not constitute, and should not be construed as, investment advice or a recommendation to buy, sell or otherwise transact in the Funds. Financial promotions are issued for marketing and information purposes; in the United Kingdom by Columbia Threadneedle Management Limited, on 31/03/25 which is authorised and regulated by the Financial Conduct Authority.
