Real Estate Investment Conditions & Trends
- The ongoing interest rate stabilization and acceptance process is underway. Despite episodes of volatility, the U.S. 10YT is expected to hover in the low-to-mid 4%’s, consistent with nominal GDP growth. The CDN 10Y has been hovering around 3.25% during this time.
- Cost and availability of capital has improved on the back of the rate cutting cycle. Debt costs are down due to tightening in spreads, though still subject to base rate volatility.
- On the buy-side, the focus will remain on income stability and growth potential. Institutional allocations to CRE in diversified cross-asset class portfolios are holding steady near 11%.
- Thematics Dominate: Niche sectors are capturing growing portion of volumes, and we expect similar portfolio rebalancing trends to continue with a focus on data centers, seniors housing and student housing.
- Outside of office, demand across all property types is steady and fundamentals are strong. Regarding office, the market is far from uniform, presenting a diverse and complex landscape. High performing, in demand office properties in prime locations continue to lead the pack, while over half of the market vacancy is concentrated within a small fraction of the overall inventory.
- Buying below replacement costs today (where possible, particularly amid “distress”) into a slowing development market will draw some investors into the market.
Check out our Q4 2024 Cap Rate Report to learn more.
Asset types include:
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