Q1 2025 Market Risk Update

How Attractive is Real Estate Risk today?

“How much risk” is the key question for investors. There are times to back up the truck, and there times to downshift into first gear. When I first started publishing the below framework in 2023, it was a time to take extra risk. The framework’s score peaked at 81 in the middle of that year, the highest score since 2009.

The attractiveness of risk has declined over the ensuing 18 months, as capital markets stabilized, terms loosened and (most recently) property values increased.

The current score of 61 is still above average, suggesting that today’s investors should be rewarded with above average returns. The most positive metrics today are a significant discount to replacement costs, sluggish consumer sentiment and elevated interest rates.

While still attractive for investment and not yet time for defense, the best portion of this cycle appears to have passed.