Regional Spotlight: Why the Americas?RegionalSpotlight:WhytheAmericas?

Changing The Narrative

Several key factors give us conviction that U.S. real estate markets are approaching a turning point:

• Monetary policy tightening has peaked. Real estate owners and appraisers are expecting borrowing costs to come down, even though that relief is not imminent.
• Property incomes have been resilient. The impact from rising cap rates has been just as deep as the GFC period, despite no broad-based distress for real estate owners or lenders. The difference this time is that NOIs have held up.
• The repricing is nearly done. Based on our modeling, most of the effect of past interest rate increases has now been factored in. Yields are already at our target acquisition range.
• The post-2020 supply wave will be over next year. The rent spikes in 2021-22 spurred the highest industrial and apartment development.

This is causing returns to weaken in less-constrained cities but sets the stage for improvement after 2025. The repricing has a little further to go in some parts of the market, and we do not expect a “V-shaped” recovery. Yet the coming period of looser monetary policy and lower supply will support values.