Real Estate

Uneven Recovery Broadens and Gains Pace

August 2021 – 11 min read
The surge in economic activity is flowing through to the U.S. property markets, albeit unevenly and with its usual lag. The Barings Real Estate team weighs in.


  • The U.S. economy delivered strong growth in the second quarter and will carry significant momentum into the second half of 2021.
  • The Fed remains committed to keeping short-term rates low through 2022; consumers are unleashing pent-up demand and excess savings; service businesses are scrambling to find workers to meet surging demand.
  • COVID remains at the top of the list of risks, and the rapidly spreading Delta variant could slow or delay the return to a post-COVID normal—the details of which remain somewhat fluid.
  • Lingering effects from supply-chain disruptions and bottlenecks are also creating headwinds, constraining production and driving up prices across a wide range of inputs, goods and services.

Property Markets

  • The surge in economic activity is flowing through to the U.S. property markets, albeit unevenly and with its usual lag.
  • Occupier demand is stabilizing and transaction activity is picking back up after a sluggish start to the year.
  • Competition among lenders and investors for apartment and industrial properties continues to drive cap rates and debt costs lower in those sectors as investors reposition portfolios to reflect changes accelerated by the pandemic.
  • Transaction data for June suggests that some of the ample liquidity in the apartment and industrial markets may be spilling over to out-of-favor sectors and markets, a sign that risk appetite in the private capital markets may follow the REIT market’s lead.
  • Despite uncertainty around office valuations, core property performance, as measured by the NCREIF Property Index (NPI), has clearly bottomed, even if returns in coming quarters decelerate after the outsized Q2 gains in industrial.

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Ryan LaRue


Philip Conner

Head of U.S. Real Estate Research & Strategy

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