Current real estate deliveries were financed in the 2020-22 low-rate era, causing a temporary supply glut in high-demand sectors like Sunbelt apartments. Since new construction halted in 2023, today's depressed prices offer a unique entry point before supply normalizes and rents can accelerate.

A massive apartment construction boom is causing rents to fall in the West and Southeast ('construction states'). Meanwhile, regions with more building hurdles, like the Northeast and Midwest ('obstruction states'), lack this new supply, causing rents to rise, which dictates local negotiating power.

The interest rate hikes of previous years caused a significant slowdown in new property construction. Because buildings take several years to complete, the market is only now feeling the impact of this reduced supply pipeline. This emerging scarcity of new properties is providing fundamental support for the value of existing buildings.

Leasing velocity in sectors like office and retail is improving as the market gains clarity. The vague "office apocalypse" story has been replaced by a more nuanced understanding that only 15-20% of office stock is truly obsolete. This certainty allows tenants and landlords to confidently make long-term leasing decisions again.

The extreme performance differences in CRE are not due to a single factor. They are the result of three major forces acting at once: cyclical supply hangovers in multifamily and industrial, structural shifts like hybrid work and e-commerce, and political changes influencing trade policy and supply chains.

Counterintuitively, the best multifamily markets aren't high-population-growth cities like Austin. These attract too much new supply, capping rent growth. The optimal strategy is to find markets with barriers to entry and minimal new construction, as this creates a durable runway for rental increases.

Due to high construction and land costs, new retail projects are rarely financially viable without public incentives. This dependency on city support acts as a governor on new supply, ensuring that development is concentrated in areas municipalities want to improve, which naturally prevents overbuilding.

The US commercial real estate recovery isn't from a post-pandemic return to office. It's a supply-side correction: new construction has plummeted while old buildings are demolished or converted, causing total office space to shrink for the first time in 25 years.

Recent poor REIT performance isn't a sign of a broken model. It's the result of a classic capital cycle where cheap money in 2021 fueled a building boom, leading to a supply glut in 2023-24. With new construction now halted, the cycle is turning favorable.