Bluerock releases 2021 outlook

The confluence of low interest rates and relatively high capitalization rates have created a historic event signaling an opportune time to be invested in institutional private real estate, said Bluerock in its 2021 outlook report. When spreads between the 10-year Treasury note yield and real estate yields exceed 375 basis points, it has historically indicated that private real estate valuations are attractive on a relative basis and are poised to deliver strong returns. Institutional real estate cap rate spreads are nearly 400 basis points, well above their long-term average as of the third quarter 2020, indicating potentially higher future institutional real estate returns.

Historically, periods of cap rate spreads higher than 375 basis points have resulted in above-average forward returns, including 15 percent and 13 percent annually over the next three years starting in in the second quarter 2003 and third quarter 2010, respectively. Bluerock is bullish on the asset class