
Real estate What are global investor flows into US real estate?
Reduced cross-border investment in new US commercial real estate may impact US and global property sectors, markets, and assets differently.
The April 2025 Federal Reserve Loan
Officer Opinion Survey (SLOOS) shows
underwriting tightening to be
much eased from 1–2 years ago.
Lender underwriting standards have
been a strong historical leading indicator
of capital value growth. April survey
results imply value gains for 2025.
While sentiment can change, the April
2025 results reinforce our measured
approach to tariff-induced volatility.
The results matter for two reasons. The first is that the April 2025 survey was conducted during March 31 to April 11 when public market reaction to tariff policy announcements were the most volatile. If bank lenders felt the need to materially change their posture toward CRE lending amid tariffs and market volatility, the survey would have been a prime opportunity to communicate that. Instead, the responses were little changed from the previous quarter and reinforced the direction of less tightening compared to a year or two ago.
The second reason relates to the strong long-term historical relationship between the SLOOS results and CRE capital value growth. From January 2000 to April 2025, the correlation between the net percent of banks tightening their CRE loan underwriting standards and the annual unlevered capital appreciation return of properties in NCREIF’s Open-End Diversified Core Equity (ODCE)4 Index two quarters later has been strongly negative at -0.79.3 Tighter underwriting standards (i.e., high positive net scores on the survey) have been highly correlated with low or negative property value change. Looser underwriting standards (i.e., low positive scores to negative net scores on the survey) have been highly correlated with positive property value gains. The strength of this lagged relationship means that the SLOOS survey historically has provided value as a leading indicator of short-term capital value changes for CRE.
Based on linear regression analysis, the 9.0% result from the April 2025 survey suggests that unlevered capital values two quarters from now would be higher than today with annual growth in the single digits (i.e., 3.9%). Importantly, the regression analysis suggests that at a confidence level of 95%, the probability of annual unlevered ODCE capital values posting positive gains two quarters from now is 69%.4 If that were to occur, it would reinforce the recent bottoming of unlevered ODCE values in 4Q-2024, despite high levels of tariff-related volatility experienced in the first part of 2025.
As we’ve stated previously, Invesco Real Estate is taking a measured approach to tariff-induced market volatility. While continuous trading in the public markets can drive hyper-responsiveness, we believe private markets have the benefit of digesting information more deliberately, without the emotional spikes. We’ll continue to monitor the SLOOS survey each quarter to gauge sentiment of senior bank loan officers. And while sentiment can change, the April 2025 results reinforce our posture of taking a measured approach to tariff-induced volatility.
Reduced cross-border investment in new US commercial real estate may impact US and global property sectors, markets, and assets differently.
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Data as of June 2025, unless otherwise stated.
Correlation indicates the degree to which two investments have historically moved in the same direction and magnitude.
NFI-ODCE (NCREIF Fund Index - Open-End Diversified Core Equity) is a fund-level capitalization weighted, time-weighted return index and includes property investments at ownership share, cash balances and leverage. An investment cannot be made into an index.
Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice. Forward-looking statements are not guarantees of future results. They involve risks, uncertainties and assumptions, there can be no assurance that actual results will not differ materially from expectations.
The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested. Property and land can be difficult to sell, so investors may not be able to sell such investments when they want to. The value of property is generally a matter of an independent valuer's opinion and may not be realized.
Generally, real estate assets are illiquid in nature. Although certain kinds of investments are expected to generate current income, the return of capital and the realization of gains, if any, from an investment will often occur upon the partial or complete disposition of such investment. Investing in real estate typically involves a moderate to high degree of risk. The possibility of partial or total loss of capital will exist.
Investing in commercial real estate assets involves certain risks, including but not limited to: tenants' inability to pay rent; increases in interest rates and lack of availability of financing; tenant turnover and vacancies; and changes in supply of or demand for similar property types in a given market.
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