Highlights from PREA Boston 2025

PREA Boston 2025–Some Takeaways

PREA's conference in Boston offered insights into current sentiment among institutional real estate investors from meetings with pension funds, insurance companies, endowments, and mid-market investment firms, from panel discussions and presentations.

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Sentiment Gradually Improving

While the investment mood has definitely improved, institutional investors are still cautious due to lingering macroeconomic uncertainty—particularly around the impact of tariffs. They are also more capital constrained due to significantly lower distributions from legacy real estate portfolios. This has contributed to one of the longest real estate down-cycles on record (the third longest to be exact).

That said, deal volumes and capital inflows are showing early signs of recovery. While a full return of institutional capital seems unlikely in 2026, there is growing evidence that the market is stabilizing, with investors selectively re-entering across specific strategies and geographies.

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Positive Consensus on Multifamily

Interest in value-add multifamily acquisitions is strong. Structural tailwind, including a persistent housing shortage, declining new construction starts, and broad affordability challenges in the housing market, have driven healthy absorption over the past year. Particularly in the naturally affordable segment of the market, the sector is well positioned for continued income growth with operators who have asset management expertise.

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Notably, there was also a marked increase in institutional appetite for multifamily development opportunities, reflecting a longer-term investment horizon. Projects delivering between 2027 and the end of the decade should therefore benefit from a broadening housing shortage and tightening fundamentals.

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Office—No Longer a Four-LetterWord

The sentiment on office has improved markedly from a year ago when even mentioning the asset class was considered a faux pas (with some investors surreptitiously mentioning they may be office curious). We did not hear any continued concerns that remote work would make the entire asset class redundant. The consensus was that with such a significant price correction, the market had hit bottom.

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For investors with conviction in specific cities, office assets present a rare dislocation opportunity. The sector continues to grapple with functional obsolescence, under-demolition, shifting tenant demands, and capital-starved “zombie” properties. As in prior cycles, expertise in targeting well-located assets in markets with strong fundamentals, in good transit-oriented locations and that are, or can be better, aligned with current tenant preferences, offers the potential for significantly outsized returns when paired with capable asset management.

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Bid-Ask Spread: Narrowing but Still Wide

A key data point presented at the conference provided an interesting rationale for the significantly lower transaction volumes in the last 12-months with a still wide bid-ask spread; Public REITs are currently priced in the 25th percentile (meaning 75% of the time, REITs have been more expensive), while private real estate remains near the 59th percentile.  This divergence has been a reliable indicator of the overall market bid-ask spread. As an aside, public equities are in their 99^th percentile!

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We’ve seen this dynamic first hand—three of our last four closed transactions were previously broken deals. Staying patient and engaged around such opportunities has been an effective “hang around the hoop” strategy in this environment.

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There was broad consensus that “extend and pretend” in the debt markets is nearing its limits. Assets trapped in untenable capital structures are effectively frozen, and the resulting capital starvation accelerates physical and operational decline—more rapidly in multifamily, where tenant turnover is faster, but inevitably in office as well. This ongoing reset is likely to yield attractive entry points for well-capitalized investors.

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Interest Rates and the Macro View

With the government shutdown limiting access to key economic data, both the Fed and market participants are largely operating blind. However, the consensus is for two more rate cuts before year-end but rates staying higher for longer—few expect are turn to the ultra-low borrowing costs of the past decade.

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As a result, investor focus has shifted toward markets and operators capable of generating organic income growth, rather than relying on financial engineering or cap-rate compression to drive returns.

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Final Thoughts

While investor capital flows have yet to fully align with improving fundamentals, pricing clarity and a maturing cycle suggest that the market has likely reached its trough. Multifamily and office—two of the industry’s largest sectors—offer compelling opportunities for value-add investors.

With limited capital in circulation, entry pricing is attractive, particularly for those with the operational skill to execute business plans and capture growth. For disciplined investors, today’s environment presents one of the most favorable risk-adjusted entry points in recent memory.

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