The Case for U.S. Real Estate Investment and Development Now
Hines Research believes that signals are still saying “go” for real estate investment, and any tangible impact from current uncertainty may be just to slow the pace, not the trajectory, of recovery. Evidence also suggests the ideal time to launch a development strategy is early in the cycle.
Here’s Why:
- History indicates it’s not buy or build, it’s buy and build.
- Data shows that year 3 of a cycle has historically been best for development returns.
- Land pricing + distress = development opportunity.
U.S. Opportunistic Fund Vintage Average Out or Under Performance Relative to Cycle Averages
This chart is the case for beginning to build now. While intuitively it makes sense to buy early in the cycle when pricing is down, the evidence shows that it’s not a case of buy or build, but buy and build in this environment. It turns out that the most opportune time to start the development process across sectors has been earlier in the cycle.
Key factors are:
- Land pricing has been the most attractive early on, just like overall pricing.
- If there are owners or developers in distress due to weakening fundamentals, it is early in the cycle when those opportunities to buy from distressed owners at a discount have been on hand.
For the analysis shown here, Hines Research looked at three property cycles since the 1990s and then looked at how strategies launched in the first seven years of each cycle did versus the average for each cycle. The positive blue bars signal outperformance. Historically, the best time to launch a development strategy has been years 2 through 4 of a cycle, with year 3 the strongest. Based on Hines’ analysis, the current recovery is roughly a year behind prior cycles, placing year 3 in 2026. If history rhymes, this could be an attractive window to consider a development strategy.