Driven by motivated sellers, increased engaged buyers, and greater availability of debt, conditions are aligning for investors who can focus on cash-flow growth and disciplined execution, according to Morgan Stanley’s 2026 Real Estate Outlook. Against this backdrop, muted new supply and rising replacement costs suggest a cycle that could prove more durable, particularly for strategies emphasizing cash-flow growth over cap-rate compression.
Key points:
Cycle durability via muted supply: New construction remains subdued while replacement costs are climbing, setting up a favorable environment for existing assets and supporting a longer runway for recovery.
Cash-flow over cap-rate compression: Rather than relying on cap-rate movements for income growth, our strategy focuses on active asset management and operational improvements that we believe can deliver more resilient returns.
Where we’re f
