Hello, I'm Rick Schaupp, Portfolio Manager at Clarion Partners.
Each quarter, we produce a Private Real Estate Dashboard through which we track five capital market indicators.
In our 2Q dashboard for 2025, we're seeing signs of positive real estate capital market health and improved commercial real estate performance.
First, private real estate performance continues to improve, with four quarters of positive total returns. Income remains steady, and we're seeing modest appreciation improvements.
Historically, values have rebounded in locations and property types for which vacancies are low, demand is strong, and new supply is constrained.
Second, public real estate markets - while often more volatile than the private markets - can be a leading indicator of values due to increased liquidity.
Public market values had declined in response to higher interest rates, but have since rebounded and now show signs of stabilization.
Third, real estate debt securities spreads have widened in response to heightened, tariff-driven uncertainty; but recently, credit availability has improved resulting in tightening over the last quarter.
Overall, liquidity in the real estate debt markets remains much improved from earlier in the cycle.
Quarterly real estate transaction volume is the fourth factor we consider.
While overall transaction volume remains below its long-term average, volumes have begun to stabilize, supported by industrial and apartment deal flow.
And fifth, we factor in commercial real estate construction and new supply. Higher construction and financing costs have resulted in an estimated 40-50% decline in new construction starts over the next several years.
Lower new supply is favorable for existing owners as it limits new competition.
Check back next quarter for our latest dashboard update!