Tracking Progress in the New Real Estate Cycle
In the Spring of 2024, ARA Research published a short piece entitled When Tough Times Offer Good Timing. The article outlined the green shoots we saw emerging in property markets signaling what we believed would be the turning point towards the beginning of a new cycle.
Eighteen months later, we look back on those early indicators to see how things have progressed, and outline why we believe now is the right time to invest in private real estate.
Then: Cycle fundamentals looked to be bottoming.
Source: When Tough Times Offer Good Timing
Now: Fundamentals in most sectors are firmly in the “Early Cycle” phase.
- Development pipelines have thinned; apartment and industrial development pipelines are down over 50% from peak (53.2% and 52.2%, respectively).[1]
- Rents are stabilizing and beginning to find their footing.
- Fundamental improvements are supporting the turnaround in market confidence and returns.
Then: Liquidity and pricing measures were still constrained.
Source: When Tough Times Offer Good Timing
Now: Liquidity has returned and pricing is normalizing.
- Transaction volumes have increased year over year for six consecutive quarters.
- Year-to-date volume through September ($352.9 billion) is the highest same nine-month period since 2022.
- Nearly all recovery metrics have moved to normal territory; only bond spreads remain outside normal bounds.
- CMBS issuance is healthy, and bank lending has become less restrictive, supporting further improvement in performance.
Then: Investing earlier in recoveries has been better than waiting.
Source: When Tough Times Offer Good Timing
Now: Returns have been positive for five consecutive quarters.
- Returns turned positive in Q3 2024 after seven negative quarters.[2]
- Unlevered returns through Q3 2025 confirm we are firmly in the early-cycle investment window.[3]
- Values remain down ~19% from recent peak, offering compelling entry discounts.[4]
- Investors may benefit from expected recovery upside by acting now.
What should investors focus on in commercial real estate for 2026?
With many hallmarks of recovery now firmly emerging, the early stages of this cycle are offering promising conditions for proactive investors. As we approach 2026, those considering entry may benefit from attractive pricing, gradually improving fundamentals, and a supportive capital environment. While each cycle unfolds differently, current trends suggest that early action could position investors well for the next phase of growth.
Our H1 2026 House View, scheduled for release in mid-January, will explore the crosscurrents and tailwinds affecting real estate for the period ahead. Stay tuned.
Notes
1 Data is from CoStar as of Q3 2025. Peak was Q1 2021 for apartments and Q3 2022 for industrial.
2 Source: Expanded NCREIF Property Index as of Q3 2025.
3 Source: Expanded NCREIF Property Index as of Q3 2025.
4 Current values compared to peak reflect difference in appreciation index values for the Expanded NCREIF Property Index, with peak recorded in Q2 2022 and current values as of Q3 2025.
Disclaimer
The information in this newsletter is as of December 3, 2025, and is for your informational and educational purposes only, is not intended to be relied on to make any investment decisions, and is neither an offer to sell nor a solicitation of an offer to buy any securities or financial instruments in any jurisdiction. This newsletter expresses the views of the author as of the date indicated and such views are subject to change without notice. The information in this newsletter has been obtained or derived from sources believed by ARA to be reliable but ARA does not represent that this information is accurate or complete and has not independently verified the accuracy or completeness of such information or assumptions on which such information is based. Models used in any analysis may be proprietary, making the results difficult for any third party to reproduce. Past performance of any kind referenced in the information above in connection with any particular strategy should not be taken as an indicator of future results of such strategies. It is important to understand that investments of the type referenced in the information above pose the potential for loss of capital over any time period. This newsletter is proprietary to ARA and may not be copied, reproduced, republished, or posted in whole or in part, in any form and may not be circulated or redelivered to any person without the prior written consent of ARA.
Forward-Looking Statements
This newsletter contains forward-looking statements within the meaning of federal securities laws. Forward-looking statements are statements that do not represent historical facts and are based on our beliefs, assumptions made by us, and information currently available to us. Forward-looking statements in this newsletter are based on our current expectations as of the date of this newsletter, which could change or not materialize as expected. Actual results may differ materially due to a variety of uncertainties and risk factors. Except as required by law, ARA assumes no obligation to update any such forward-looking statements.
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