Investing at Inflections: Real Estate Equity in a Changing Rate Environment

By: Ohm Devani and James Williams, Humphreys Capital 

_{This article explores the resilience of real estate investments amid rising interest rates and shifting macroeconomic conditions. By examining the impact on valuations, particularly within the multifamily sector, it highlights the historical correlation between cap rates and U.S. Treasury yields. The analysis suggests that while current cap rates have only partially adjusted to recent rate increases, future opportunities may emerge as the market stabilizes and real estate fundamentals begin to normalize.} 

_{This is an excerpt from NCPERS Spring 2025 issue of PERSist.}

"Investing in Inflections" explores the resilience of real estate investments amid rising interest rates and shifting macroeconomic conditions. By examining the impact on valuations, particularly within the multifamily sector, it highlights the historical correlation between cap rates and U.S. Treasury yields. The analysis suggests that while current cap rates have only partially adjusted to recent rate increases, future opportunities may emerge as the market stabilizes and real estate fundamentals begin to normalize. Through a study of the growing support for alternative investments from public pension plans, this white paper highlights the evolution of investment allocations towards private real estate. 

For 30 years, the median private fund investing in North American real estate has delivered reliably positive returns. This proved true even as the real estate sector experienced periods of volatility across multiple credit cycles, evolving demographic trends, and structural changes to the American economy. In light of this track record, it is worth considering why real estate funds have been so resilient and what we should expect in this current cycle.

Click here to read the full white paper from Humphreys Capital. 

Bios: Ohm Devani, Director, Analytics, and James Williams, Senior Analyst, Analytics work at Humphreys Capital.