Overview 

Historically, real estate and economic cycles have been highly correlated. However, unlike prior cycles, the end of the last real estate cycle was not accompanied by an economic recession. A relatively strong economy is continuing to drive improvements in real estate fundamentals, such as consistent tenant demand and rent growth, fueled in part by the recent alleviation provided by lower interest rates. 

As a result, we are at the start of a new real estate cycle. We believe solid economic growth will further drive positive fundamentals in real estate in 2025, as lower interest rates should continue to support economic growth. Indeed, transaction volumes have already increased from 2024 and are estimated to move higher in 2025, driven by renewed investor interest as markets stabilize (see below). Estimated transaction volumes for 2025 exceed $400 billion, which is well above the pre-Covid annual average from 2009-2019. Meanwhile, the relatively low consumer loan delinquency rate is evidence that enough capital is available to keep markets stable, although the refinancing of commercial real estate remains a work in progress.

Opportunities in the Current Cycle 

Demand for various property types has changed since the pandemic, due to shifting consumer preferences. As a result, opportunities in this cycle for real estate investors are different than those available prior to 2020. Some assets are less competitive in the marketplace now, including non-prime office space and less-functional industrial properties. 

Still, valuations are at or near a bottom on a wide swath of sectors, which could present excellent investment opportunities, in our view. In the multifamily sector, recent reductions in the level of new supply and still elevated mortgage rates could potentially drive healthy demand and better fundamentals.

Meanwhile, shifts in supply chains and a relatively healthy consumer could continue to support the industrial sector. New logistics development under construction has slowed significantly. In addition, the impact of new trade policy may change the flow or price of goods entering and leaving the country. We believe this could create a wide range of investment opportunities, as new supply market centers emerge as the result of onshoring needs.

The Bottom Line

The macro environment for the emerging real estate cycle remains encouraging. Capitalization rates, or “cap rates”, which are used as an estimate for the rate of return on a real estate investment, could shift lower over time. They are likely to stabilize at higher levels than in the last cycle, largely due to interest rates remaining higher than the historic lows of the previous cycle. 

It is important to emphasize that during a real estate cycle’s early phase, market and individual asset selection are critical for investors. The skill of a manager during this nascent part of the cycle can have a major impact on returns. Macro factors influence cap rates directionally, but the strength of the individual asset is critical to the success of the investment. That is why engaging with a strong manager, who is skilled in assessing the relative strength of each market while conducting effective due diligence around each asset, is key to a successful real estate investment strategy.

A WORD ABOUT RISK 

As an asset class, private credit is comprised of a large variety of different debt instruments. While each has its own risk and return profile, private credit assets generally have increased risk of default, due to their typical opportunistic focus on companies with limited funding options, in comparison to their public equivalents. Because private credit usually involves lending to below investment grade or non-rated issuers, yield on private credit assets is increased in return for taking on increased risk. Investments in real estate-related instruments may be affected by economic, legal or environmental factors that affect property values, rents or occupancies of real estate. Infrastructure companies may be subject to a variety of factors that may adversely affect their business, including high interest costs, high leverage, regulation costs, economic slowdown, surplus capacity, increased competition, lack of fuel availability and energy conservation policies. Alternative investments often are speculative and include a high degree of risk. Investors could lose all or a substantial amount of their investment. High-yield bonds are subject to interest rate risk. When interest rates rise, bond prices fall; generally, the longer a bond’s maturity, the more sensitive it is to this risk. Yields are subject to change with economic conditions. Yield is only one factor that should be considered when making an investment decision. The information in this publication is not and is not intended as investment advice, an indication of trading intent or holdings, or prediction of investment performance. Diversification does not guarantee a profit or protect against loss. Views and information expressed herein are subject to change at any time. Brookfield disclaims any responsibility to update such views and/or information. This information is deemed to be from reliable sources; however, Brookfield does not warrant its completeness or accuracy. Opinions expressed herein are current opinions of Brookfield, including its subsidiaries and affiliates, and are subject to change without notice. Brookfield, including its subsidiaries and affiliates, assumes no responsibility to update such information or to notify clients of any changes. Any outlooks, forecasts or portfolio weightings presented herein are as of the date appearing on this material only and are also subject to change without notice. Past performance is not indicative of future performance, and the value of investments and the income derived from those investments can fluctuate. 

FORWARD-LOOKING STATEMENTS 

Information herein contains, includes or is based on forward-looking statements within the meaning of the federal securities laws, specifically Section 21E of the Securities Exchange Act of 1934, as amended, and Canadian securities laws. Forward-looking statements include all statements, other than statements of historical fact, that address future activities, events or developments, including, without limitation, business or investment strategy or measures to implement strategy, competitive strengths, goals, expansion and growth of our business, plans, prospects and references to our future success. You can identify these statements by the fact that they do not relate strictly to historical or current facts. Words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe” and other similar words are intended to identify these forward-looking statements. Forward-looking statements can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Many such factors will be important in determining our actual future results or outcomes. Consequently, no forward-looking statement can be guaranteed. Our actual results or outcomes may vary materially. Given these uncertainties, you should not place undue reliance on these forward-looking statements. It is not intended to provide an overview of the terms applicable to any products sponsored by Brookfield Corporation and its affiliates (together, “Brookfield”). Information and views are subject to change without notice. Some of the information provided herein has been prepared based on Brookfield’s internal research, and certain information is based on various assumptions made by Brookfield, any of which may prove to be incorrect. Brookfield may not have verified (and disclaims any obligation to verify) the accuracy or completeness of any information included herein, including information that has been provided by third parties, and you cannot rely on Brookfield as having verified any of the information. The information provided herein reflects Brookfield’s perspectives and beliefs as of the date of this commentary.

INDEX PROVIDER DISCLAIMER 

The quoted indexes within this publication are unmanaged and cannot be purchased directly by investors. Index performance is shown for illustrative purposes only and does not predict or depict the performance of any investment. There may be material factors relevant to any such comparison, such as differences in volatility and also regulatory and legal restrictions between the indexes shown and any investment in a Brookfield strategy, composite or fund. Brookfield obtained all index data from third-party index sponsors and believes the data to be accurate; however, Brookfield makes no representation regarding its accuracy. Indexes are unmanaged and cannot be purchased directly by investors. 

Brookfield does not own or participate in the construction or day-to-day management of the indexes referenced in this document. The index information provided is for your information only and does not imply or predict that a Brookfield product will achieve similar results. This information is subject to change without notice. The indexes referenced in this document do not reflect any fees, expenses, sales charges or taxes. It is not possible to invest directly in an index. The index sponsors permit use of their indexes and related data on an “as is” basis, make no warranties regarding the same, do not guarantee the suitability, quality, accuracy, timeliness and/or completeness of their index or any data included in, related to or derived therefrom, and assume no liability in connection with the use of the foregoing. The index sponsors have no liability for any direct, indirect, special, incidental, punitive, consequential or other damages (including loss of profits). The index sponsors do not sponsor, endorse or recommend Brookfield or any of its products or services. Unless otherwise noted, all indexes are total-return indexes.

INDEX DEFINITIONS 

The Preqin Real Estate Index captures in an index the return earned by investors on average in their private real estate portfolios, based on the actual amount of money invested in private capital partnerships. Each data point is individually calculated from the pool of closed-end funds for which comprehensive performance data is held, as of both the start and end of the quarter. 

The FTSE EPRA Nareit Developed Real Estate Index is an unmanaged market capitalization-weighted total-return index that consists of publicly traded equity REITs and listed property companies from developed markets. 

The MSCI World Index is a free-float-adjusted market-capitalization-weighted index that is designed to measure the equity market performance of developed markets. 

© 2025 Brookfield Corporation 

ID B691727