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US private real estate values are now correcting, and capital availability is at a cyclical low. Fundamentals are still expected to remain relatively healthy across the apartment, industrial, and retail sectors but the pricing of these sectors will impact total returns the most.

Kurt Edwards, Head of Real Estate Research & Strategy – US

Private real estate values are now correcting, and capital availability is at a cyclical low. Heightened uncertainty around the cost of capital and minimal amounts of financing contribute to the scarcity of capital. 4Q22 transaction volume declined by 62% when compared to 4Q21, creating hardships for appraisers trying to use comparable sales to evidence price changes. The lag in private real estate price correction has exacerbated the performance differential between public and private markets, creating a need for institutions to rebalance. Redemption pools are now common across most open-end investment vehicles, but without a reasonable ability to create liquidity.