The real estate market is in the midst of a rebound amid improved economic conditions and a declining interest rate environment. The Federal Reserve’s September interest rate cut of 50 bps calmed the headwinds created by high interest rates that slowed real estate transaction volumes over the past two years. The additional 25 bps cut in November should further support the real estate market. The Fed’s easing is taking place against a backdrop of other factors that create a supportive environment for real estate investment. Taken together, these suggest the real estate market is at an attractive entry point for real estate investors. 

Debt markets have reopened. We are already in the next phase of the market cycle, as debt markets have reopened, evidenced by a sharp increase in issuance of commercial mortgage-backed securities. New-issue volume for the first half of 2024 was $42.3 billion, up nearly threefold from the same period last year. 

A range of opportunities for skilled real estate managers to access. While rates are considerably lower than in recent months, they are still higher than when many commercial real estate loans were made during pandemic lows. These loans will be maturing over the next few years. According to data compiled from S&P Global, roughly $950 billion of U.S. commercial real estate mortgages are estimated to mature in 2024, with an additional $2.2 trillion through 2026. With the hangover from higher rates and capital stress still present, the maturity wall emerging over the next three years should present a wide range of investment prospects for opportunistic real estate strategies. These include distressed loans and nonperforming loans, many with creditors looking to unload debt when sellers are unable to refinance. Finding such opportunities, of course, requires a skilled and experienced manager, who has access to off-market transactions. 

Supply is constrained and demand is strong. The supply of new rental housing and logistics facilities has been muted over the last few years. According to CoStar Real Estate Data, new construction starts for these sectors are down 70% as of the second quarter of 2024 from their peak, due to higher construction costs from recent inflation. Demand for rental housing has been supported by the higher cost of homeownership, and the need for new warehouse facilities in infill locations remains strong, supported by e-commerce growth. These factors provide a strong underpinning for the value of existing assets today, and these trends should continue, given the supply and demand dynamics.

Historical patterns. Historically, property value corrections have reset the stage for extended periods of positive total return performance. As shown in the chart, in the open-end core real estate market, periods following economic slowdowns have been followed by large rebounds in subsequent years. Over the five-year periods following downturns, outsized cumulative returns followed, ranging from 58.5% to 72.4%.

A WORD ABOUT RISK
Investments in real estate-related instruments may be affected by economic, legal or environmental factors that affect property values, rents or occupancies of real estate. Infrastructure companies may be subject to a variety of factors that may adversely affect their business, including high interest costs, high leverage, regulation costs, economic slowdown, surplus capacity, increased competition, lack of fuel availability and energy conservation policies.
Alternative investments often are speculative and include a high degree of risk. Investors could lose all or a substantial amount of their investment. High-yield bonds are subject to interest rate risk. When interest rates rise, bond prices fall; generally, the longer a bond’s maturity, the more sensitive it is to this risk. Yields are subject to change with economic conditions. Yield is only one factor that should be considered when making an investment decision.
The information in this publication is not and is not intended as investment advice, an indication of trading intent or holdings, or prediction of investment performance. Diversification does not guarantee a profit or protect against loss. Views and information expressed herein are subject to change at any time. Brookfield disclaims any responsibility to update such views and/or information. This information is deemed to be from reliable sources; however, Brookfield does not warrant its completeness or accuracy.
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FORWARD-LOOKING STATEMENTS
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The information provided herein reflects Brookfield’s perspectives and beliefs as of the date of this commentary.

INDEX PROVIDER DISCLAIMER
The quoted indexes within this publication are unmanaged and cannot be purchased directly by investors. Index performance is shown for illustrative purposes only and does not predict or depict the performance of any investment. There may be material factors relevant to any such comparison, such as differences in volatility and regulatory and legal restrictions between the indexes shown and any investment in a Brookfield strategy, composite or fund. Brookfield obtained all index data from third-party index sponsors and believes the data to be accurate; however, Brookfield makes no representation regarding its accuracy. Indexes are unmanaged and cannot be purchased directly by investors.
Brookfield does not own or participate in the construction or day-to-day management of the indexes referenced in this document. The index information provided is for your information only and does not imply or predict that a Brookfield product will achieve similar results. This information is subject to change without notice. The indexes referenced in this document do not reflect any fees, expenses, sales charges or taxes. It is not possible to invest directly in an index. The index sponsors permit use of their indexes and related data on an “as is” basis, make no warranties regarding same, do not guarantee the suitability, quality, accuracy, timeliness and/or completeness of their index or any data included in, related to or derived therefrom, and assume no liability in connection with the use of the foregoing. The index sponsors have no liability for any direct, indirect, special, incidental, punitive, consequential or other damages (including loss of profits). The index sponsors do not sponsor, endorse or recommend Brookfield or any of its products or services. Unless otherwise noted, all indexes are total-return indexes.

INDEX DEFINITIONS
The Preqin Infrastructure Index captures in an index the return earned by investors on average in their private infrastructure portfolios, based on the actual amount of money invested in private capital partnerships. Each data point is individually calculated from the pool of closed-end funds for which comprehensive performance data is held, as of both  the start and end of the quarter.
The Preqin Real Estate Index captures in an index the return earned by investors on  average in their private real estate portfolios, based on the actual amount of money  invested in private capital partnerships. Each data point is individually calculated from the pool of closed-end funds for which comprehensive performance data is held, as of both the start and end of the quarter.
The Preqin Private Equity Index captures in an index the return earned by investors on average in their private equity portfolios, based on the actual amount of money invested in private capital partnerships. Each data point is individually calculated from the pool of closed-end funds for which comprehensive performance data is held, as of both the start and end of the quarter.
The Cliffwater Direct Lending Index (CDLI) seeks to measure the unlevered, gross of fee performance of U.S. middle market corporate loans, as represented by the asset-weighted performance of the underlying assets of Business Development Companies (BDCs), including both exchange-traded and unlisted BDCs, subject  
to certain eligibility requirements.
The FTSE EPRA Nareit Developed Real Estate Index is an unmanaged market- capitalization-weighted totalreturn index that consists of publicly traded equity REITs and listed property companies from developed markets.
The FTSE Global Core Infrastructure 50/50 Index gives participants an industry-defined interpretation of infrastructure and adjusts the exposure to certain infrastructure subsectors. The constituent weights are adjusted as part of the semi-annual review according to three  broad industry sectors: 50% Utilities; 30% Transportation, including capping of 7.5% for  railroads/railways; and a 20% mix of other sectors including pipelines, satellites and telecommunication towers. Company weights within each group are adjusted in proportion to their investable market capitalization.
The ICE BofA US High Yield Index tracks the performance of U.S.-dollar-denominated below-investment-grade corporate debt publicly issued in the U.S. domestic market.  
The ICE BofA Merrill Lynch Global High Yield European Issuers Non-Financial 3% Constrained Ex Russia Index is a sub-index that contains all securities in the broader index except those from financial issuers or with Russia as their country of risk but caps issuer exposure at 3%. The index is rebalanced monthly. The dex is USD hedged.
The MSCI World Index is a free-float-adjusted market-capitalization-weighted index that is designed to measure the equity market performance of developed markets. 

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