Cap rate compression is here for the long term as global shocks create a 1970s-style twin-peak inflation cycle, Hines said Wednesday. The firm’s newly issued 2025 Global Mid-Year Outlook shows real estate set for a period of accelerated growth, as conditions run parallel to a favorable 16-year period for the sector last occurring between 1966 and 1982.
Hines CIO David Steinbach believes today’s market conditions represent a similarly generational moment for capital deployment in real estate. “Through the ’70s and into the early ’80s, real estate performance accelerated due to income growth driven by scarcity, discipline and rising replacement costs,” said Steinbach. “Today, global construction has fallen off compared to historic averages, yet demand has remained.”
He continued, “That supply and demand mismatch is not hypothetical. It’s currently being baked into the back half of this decade. In the immediate moment, these forces represent an uncommon buying opportunity.”
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