Commercial real estate is entering the early stages of a new cycle — one defined less by broad-based recovery and more by widening dispersion across sectors and regions.
“We believe we are in the early innings of a new real estate cycle, driven by the structural reset resulting from higher interest rates,” says Josh Morris, a partner and global head of real estate at Davidson Kempner Capital Management (DK), in an interview with IREI. While it is now widely accepted that higher rates have changed commercial real estate valuations, Morris notes that DK’s research points to a more important second-order effect: “In our view, higher rates are likely to lead to greater dispersion across the commercial real estate universe.”
Morris identifies three forces that, in combination, may have a multiplying i
