Expect writedowns for U.S. real estate

A recent virtual roundtable with institutional investors, consultants and investment managers held by Institutional Real Estate, Inc. tackled the property market implications of a U.S. recession as the Fed raises interest rates to tame inflation. The in-depth discussion was moderated by Reno Sio, managing director, Asia Pacific, at IREI.

Key takeaways include the following:

Three macro challenges make it nearly impossible for U.S. real estate to escape writedowns in the next few quarters:

Debt: All-in debt rates are somewhere in the 6 to 7 percent range. This makes it nearly impossible for cap rates to remain low. The relative value proposition: If you assume a long-term, stabilized 10-year treasury of 3.25 to 3.50 percent, that puts upward pressure on cap rates and downward pressure on values. The U.S. economy: Given uncertainty and the Fed’s indication it wants to crush dem