For two years, the most useful word in private real estate was "wait." Cap rates were moving — but not fast enough, and not in the same direction across markets. Lenders were retrenching. Funds were extending hold periods. Sellers were not selling and buyers were not buying. The transactions that did print were often distressed, opportunistic, or off-market enough to be unrepresentative of where the market actually cleared.
The data has now, finally, begun to move. Transaction volume in core sectors is up year-over-year for three consecutive quarters. The spread between buyer and seller expectations — in our private deal book — has narrowed from roughly 200 basis points to closer to 75. Debt is available again on terms our underwriters will accept, if not quite the terms they preferred.
None of this constitutes a buying signal. But it does mark the close of a particular kind of dislocation, and the opening of a particular kind of opportunity. We think the next two years will reward investors who have spent the last two doing the unglamorous work of building conviction.
Where we are underwriting
Across our real estate platform, we are concentrating our work in three sectors and two structures.
Sectors first. Logistics and industrial remains structurally favored — though we are choosing infill submarkets with deep tenant demand rather than the speculative outer-ring product that the cycle's late vintages over-built. Multifamily, particularly purpose-built rental and build-to-rent in supply-constrained submarkets, is closer to a normalized basis than it has been in five years. Medical office remains under-loved by capital but consistent in cash flow — the kind of asset class we are happy to own through cycles that do not include it.
Structures second. We are interested in off-market acquisitions from owners who need duration capital — frequently family partnerships and operating companies with a real-estate balance sheet. We are also writing structured equity into otherwise-strong sponsors who need to recapitalize without selling. Both routes give us the right kind of basis at the right kind of pace.
The investor who waits for the market to "look like it is recovering" almost always pays for the recovery itself.
What we are not doing
We are not chasing distressed office. We have no thesis for the asset class at any price short of land value — and at land value, the underwriting is not real estate at all but land entitlement, which is a different business than the one we are in.
We are not buying for the cap-rate decline. We do not believe forward cap rates will be meaningfully tighter than today. Returns from here will need to be earned from operations, leasing, and selective development — not from a re-rating tailwind.
And we are not raising third-party fund capital to deploy this view. Our real estate platform invests from balance sheet and from long-duration partner capital. The capital base is matched to the assets, and the assets are matched to the discipline.
What we think will be remembered
Markets like this one create two kinds of records. The first is the record of who bought what, at what price, in what year. The second — far more important — is the record of who built the relationships, did the work, and was ready when the market opened. The second record is invisible during the cycle and obvious afterward.
Most of what our real estate team has done in the past twenty-four months will not appear in our portfolio. It will appear in conversations five years from now, when an owner picks up the phone because we were one of the few investors who stayed in touch while the market was quiet.
That is the part of the work that does not show on a transaction sheet. It is also, in our experience, the part that matters most.