The Long Good Buy: Successfully Redeploying in Today's Market

This article originally appeared in PREA Quarterly's Winter 2024 edition


The heart of the buy-hold-sell decision is recognizing there are two real estate market cycles that interact with each other. The first is the fundamentals cycle, including metrics such as supply and demand, occupancy rates, and rent growth. The second is the capital markets cycle —pricing responds to changes in fundamentals, expectations of future conditions, and changes in the cost of capital.

Although fundamentals do not always lead pricing, this was the case in the major downturns of the 1990s and 2008-2010. Initial signs from Hines' research indicate that the current cycle may play out that way as well, allowing investors to monitor the trajectory of fundamentals to anticipate pricing trends by sector.

Opportunities to harvest and redeploy capital arise not simply when there are two distinct cycles but when these are asynchronous across sectors.

For example, occupancy in one sector (or region or submarket, etc.) can change independent of others, or pricing declines can be more severe in one sector or market than another. Identifying these anomalies can help investors find potentially attractive investments.

The Long Good Buy

Alfonso Munk
CIO, Americas

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The content herein and in the report is provided for informational purposes only. Nothing above or in the report constitutes investment, legal, or tax advice or recommendations. Such content should not be relied upon as a basis for making an investment decision and is not an offer of advisory services or an offer to invest in any product or asset class. It should not be assumed that any investment in an asset class described herein will be profitable. Any projections, estimates, forecasts, targets, prospects and/or opinions expressed in these materials are subject to change without notice. Opinions or beliefs expressed in these materials may differ or be contrary to opinions expressed by others. Certain information above and in the report has been obtained from third-party sources. Hines has not independently verified such information.