Bluerock’s Q3 2024 Market Insights Newsletter
In this issue…
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- The S&P 500 is almost never this expensive. It’s a disaster waiting to happen.
- Inside the institutionalization of industrial outdoor storage
- Cap rates normalize amid stabilizing market
- Real estate investors are finally ‘bullish’ ahead of rate cuts
- Private market growth in recent years has been remarkable. We think there’s more to come.
FEATURED CONTENT
The S&P 500 is almost never this expensive. It’s a disaster waiting to happen.
Could a “lost decade” for stocks or the 60/40 portfolio be brewing? The historical evidence suggests that conditions are similar to previous years in history that preceded “lost decade” events, namely the cyclically adjusted price earning ratio.
Source: Morningstar
IN THE NEWS
Inside the institutionalization of industrial outdoor storage
As capital flows to this subsector, one might expect lower long term cap rates and attractive returns. The most attractive sites are infill, close to population centers, and difficult to replace.
Source: Globest.com
Cap rates normalize amid stabilizing market
Cap rates appear to have stabilized as the unusual wild swings of the past 5 years seem to be behind us. Decreasing interest rates are likely to expand cap rate spreads into attractive territory, paving the way for attractive returns during the recovery.
Source: Globest.com
Real estate investors are finally ‘bullish’ ahead of rate cuts
There are multiple reasons for renewed optimism in commercial real estate: interest rates have started to come down, transaction activity is picking up, and healthy supply/demand fundamentals.
Source: Fundfire
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Private market growth in recent years has been remarkable. We think there’s more to come.
Move over traditional banking. Credit investments may help offer real (inflation-adjusted) returns in the years ahead as the market heats up. It likely won’t be limited to corporate credit, but also include renewable energy and real estate financing.
Source: AllianceBernstein
NEW DATA
“Lost Decades” are more common than you think
The 60/40 stock/bond hasn’t always been the consistent performer we might like to believe. There have been several near decade periods since 1900 where real return for this model portfolio have been flat to negative. In each case, high stock valuations measured by the cyclically adjusted price/earnings ratio and real yields were good indicators of such periods.
The 60/40 stock/bond portfolio since 1900
Source: GMO
NEW RESEARCH
CBRE IM Positive Signs | CBRE
Values likely near trough; recoveries vary by sector.
A decade of underbuilding has left the U.S. a vast and likely permanent housing shortage, esp. of for-sale product, made worse by high mortgage costs.
The U.S.’ relatively low E-Commerce penetration relative to other economies supports ongoing demand for fulfillment centers.
QUOTES OF THE QUARTER
``There have been six periods, averaging 11 years each, in which an investor in a 60/40 portfolio would have either broken even relative to inflation or, even worse, lost money in real terms.``
BEN INKER
Co-Head of Allocation, GMO
``I’m optimistic that we’re at the forefront of the next cycle. The bid-ask spread that’s been persistent for the last 18 months has largely come together. We’re seeing a lot more groups who were on the sidelines now coming out to acquire deals.``
MITCH SINBERG
Senior Managing Director of Mortgage Banking, Berkadia
Read more insights in the Bluerock Library.