At a Glance
- The real estate recovery is underway and still early.
- Fundamentals and liquidity are aligning to support growth.
- Compelling entry points persist despite improving conditions.
We believe Q3 2024 marked the trough of the most recent real estate (RE) cycle as the lingering effects of the Federal Reserve’s 2022–2023 tightening campaign began to fade. In discussions with investors, we often note that RE recovery cycles typically span five to eight years. Importantly, returns during these recovery periods have historically averaged roughly 400 basis points above long‑term norms (approximately 13% versus 9%).1
In 2025, private RE finished the year with positive performance, extending the streak to six consecutive quarters. While index returns remain approximately 17% below the recent peak recorded in Q3 2022, this backdrop underpins our view that the RE recovery is not only underway but still has meaningful room to run.2 Below, we outline five reasons supporting this conviction:
Historical real estate recoveries8
1. Favorable supply/demand balance
Demand remains resilient, driven by a growing desire for flexibility and supporting continued growth in high-quality rental housing. Industrial real estate also remains in favor as the economy becomes more oriented toward technology and logistics, underpinning demand across the e‑commerce, supply chain reconfiguration, and data center segments. Meanwhile, supply remains limited, with industrial and multifamily completions down roughly 70% from recent cycle peaks, reinforcing a favorable supply/demand backdrop.3
2. Liquidity is improving
Liquidity is returning as debt markets reopen. The cost of capital has declined as base rates and spreads have narrowed, encouraging transaction activity and supporting real estate valuations. Loan originations are up 29% year-over-year, driven largely by refinancing activity—a clear signal that confidence is rebuilding.4
3. Transaction volumes are increasing
RE deal activity is accelerating. Transaction volumes rose 31% year-over-year in Q4 2025, supported by narrowing bid-ask spreads and early signs of price appreciation across sectors.5 Individual asset sales—often viewed as an early indicator of a sustained recovery—have led the rebound, rising 26% year-over-year and signaling renewed buyer engagement.
4. REITs offer attractive pricing
Public REITs typically trade at premiums to net asset value during expansionary phases. Today, they continue to trade at approximately 14% median discount to NAV, even as underlying fundamentals improve.6 We believe this disconnect between strengthening property-level performance and lagging public market valuations presents an opportunity to acquire high-quality assets below intrinsic value, with potential upside driven by a normalization of valuation discounts.
5. Fundraising is improving
While volumes remain below the peaks reached in 2022, private real estate fundraising is showing signs of recovery. Commitments to closed-end funds are up approximately 20% year-over-year, signaling renewed confidence from institutional and wealth investors.7
Stephen Siena, Head of Research, Real Estate and Terry Simpson, Senior Investment Strategist, Wealth Management Solutions, contributed to this piece.
