A more constructive interest rate environment, valuation resets, dwindling supply, and shifting demand from technology, demographics, and evolving consumer preferences are fundamentally reshaping real estate markets, argues Larissa Belova
After a turbulent period of repricing and disruption, the global real estate market is approaching what many see as a rare entry point. Valuations have adjusted, interest rates, while elevated, have stabilized, new supply is dropping across sectors, and demand drivers are evolving rapidly, opening one of the most compelling investment windows in years. Since the end of 2022, when the increased cost of capital started to flow through the capital markets, commercial real estate values have declined in the US by 20% and by 16% in Europe. Leading institutional investors have publicly highlighted this as a generational buying opportunity following valuation resets across major markets.
This is more than a cyclical shift. Real estate markets are exhibiting a combination of factors not seen after prior historical corrections, where overbuilding or excessive use of leverage contributed to distress. On the contrary, fundamentals have remained stable or positive in most sectors, there is little evidence of overleveraging and, with exceptions for certain geographies and sectors, falling supply has buoyed performance and rent growth.
For years, investors rode a wave of low interest rates and steady appreciation, but 2022 was a turning point. As central banks raised rates to combat inflation, the ground shifted beneath the feet of owners, occupiers and investors alike.
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