2025 Global Outlook – The Living Sector

Despite the dis­par­i­ty of real estate cycles across regions, coun­tries, and cities, the liv­ing sec­tor prob­a­bly has the most sim­i­lar­i­ties across the globe. The hous­ing short­age, which is well-doc­u­ment­ed in devel­oped coun­tries is a fair­ly uni­ver­sal phe­nom­e­non. That said, the degree of under­sup­ply does vary across coun­tries and prod­uct types.

The lack of afford­abil­i­ty is cre­at­ing sig­nif­i­cant demand for rental units, par­tic­u­lar­ly in devel­oped economies. Over 80% of house­holds Hines ana­lyzed showed clear momen­tum for rent­ing over buy­ing, with rent­ing house­holds grow­ing much more quick­ly than home-own­ing ones.1 In many of these coun­tries, the own­er­ship of rental prop­er­ties is extreme­ly frag­ment­ed, with rel­a­tive­ly lit­tle insti­tu­tion­al­ly built, owned, and man­aged product.

Hines expects the wave of cycli­cal sup­ply to slow in 202627, and then mar­ket rent growth should accel­er­ate from its cur­rent lows.

As shown in the chart below, Hines esti­mates that U.S. NOI would have to increase about 15% or cap rates would need to decrease by 75 basis points (or some com­bi­na­tion there­of) for new devel­op­ment to pen­cil at the nation­al lev­el, though the range of those esti­mates varies at the local mar­ket lev­el. While there is still a gap, this is a notable improve­ment from a year ago (3Q 2023) when NOI was more than 20% low­er and cap rates were more than 100 basis points high­er than need­ed to kick start a new development.

Required Change in Cap Rates or NOI to Make U.S. Apartment Development Pencil


In the U.S., the dif­fi­cul­ty of home­own­er­ship attain­ment seems to be boost­ing sin­gle-fam­i­ly and town­home rental housing.