All the Ingredients for a Real Estate Resurgence

By Brad Thomas, Editor, Wide Moat Daily

President Donald Trump isn't happy with Federal Reserve Chair Jerome Powell.

I quoted Trump in Monday's Wide Moat Daily, including how he wrote on Truth Social that:

"Too late" Jerome Powell is costing our Country Hundreds of Billions of Dollars. He is truly one of the dumbest, and most destructive, people in Government, and the Fed board is complicit. Europe has had 10 [interest rate] cuts, we have had none. We should be 2.5 Points lower, and save $BILLIONS on all of Biden's Short Term Debt. We have LOW inflation! TOO LATE's an American Disgrace!

That was just one of his tirades after the Federal Reserve chose to hold benchmark interest rates steady last Wednesday.

Sitting presidents pressuring their Fed chairs isn't a new phenomenon. It's practically tradition. Clinton sat Alan Greenspan next to the first lady during the 1993 State of the Union. This was interpreted as an attempt to "butter up" the man running America's central bank. Lyndon Johnson actually shoved his Fed chair, William McChesney Martin, and supposedly shouted at him, "My boys are dying in Vietnam, and you won't print the money I need!"

Trump prefers to wallop Powell over social media. To each their own...

Giving Powell the benefit of the doubt, the Fed is likely holding rates steady – even as inflation has fallen – simply because so much is going on. Trade wars, literal wars – that's a lot of uncertainty. And no Fed chair would be eager to cut rates in that environment, especially one that was already caught flat-footed a few years ago.

Still, I can't help but feel Powell is enjoying his control over rates – whether he's right to do so or not. When he appeared before Congress yesterday, he said we're "well-positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance."

Well, I imagine something inside him grinned, knowing it would irk the man calling him a moron.

That is human nature, after all. Though perhaps Powell is above all that. Who knows?

I do know, however, know that his comments disappointed more than just Trump. Commercial real estate ("CRE") investors have been waiting for rates to drop ever since they began rising back in 2022.

We were full-out rejoicing back in November, glowing in the promise of falling inflation under a Trump administration. 2025 was going to be our year, we thought. As interest rates dropped, CRE deals would once again start happening and valuations would rise.

It's now halfway through the year, and we haven't seen a hint of any such thing. But that might be changing.

The truth is that inflation has come down. The Iran/Israel war (as of this writing, at least) appears to be cooling. And if the administration can ink some high-profile trade deals, that uncertainty should disappear soon.

The market is starting to price in rate cuts.

The CME Group FedWatch Tool – which visualizes likely changes to the Fed's rate, as implied by the futures markets – is assigning a 20% chance to a quarter-point cut in July. Look out to September, and that outcome has a 68% probability. December? The majority opinion of the market (76%) is that rates will be slashed somewhere between 50 and 100 basis points.

And if rates are coming down in the months ahead, it makes sense to look at rate-sensitive assets like CRE right now.

And I'm not the only one who thinks so.

A Booming CRE Market Is Already in the Making

If you're a hard-core commercial real estate investor like me, then you know Hines.

Hines is a leading investment manager of global real estate, owning and operating a total $90.1 billion of assets. It's been operating for 68 years... has 5,000 employees in 30 countries... and analyzes reams of CRE data every day to determine the most profitable opportunities.

So you'd better believe I follow it.

Hines recently released its 2025 Mid-Year Global Investment Outlook, which is well worth the read. Titled "The Bell Can't Be Unrung: Opportunity in the Midst of Uncertainty," it starts out with a sober – but perhaps surprising – assessment about "the underlying forces shaping" the rough ride 2025 has been so far.

All of the "deglobalization, demographic pressure, energy insecurity, and political bifurcation" has been:

... building over time, like massive tectonic shifts gradually making their way to the surface. As a result, the landscape built over the last four decades is transforming, becoming more fragmented and localized. In other words, the bell had been ringing; it's only now that we can finally hear it.

Yet, believe it or not, that doesn't spell long-lasting doom for CRE. If anything, it's just made today's buildings more valuable in the long term.

Today, global construction has fallen off compared to historic averages. Yet demand has remained. The reality is that we are not building enough to meet the next cycle's needs. That supply/demand mismatch is not hypothetical; it's currently being backed into the back half of this decade. In the immediate moment, these forces potentially represent an uncommon buying opportunity.

Remember how the residential real estate market skyrocketed (in some markets) in 2020 to 2023? That may have been triggered by COVID fears and ensuing restrictions.

But it wouldn't have been nearly so powerful if the last crisis, the housing crash of 2008, hadn't depressed homebuilding for over a decade. The necessary supply just wasn't there when demand finally shot up in an instant.

Here's a chart I shared in a recent issue of The Wide Moat Letter that should give you an idea of the limited supply coming onto the market in those post-crisis years.

Limited supply met sharply higher demand starting in 2020. You know what happened next. And that is precisely what should happen soon enough with CRE.

Good CRE Times Are 'a Comin'

I'm not predicting another pandemic, for the record. Let me be perfectly clear about that. While we might still see some sort of recession in the next 12 months or so...

I'm expecting an economic boom like you wouldn't believe in the foreseeable future. That's simply what happens when you cut back on unnecessary business regulations...

Drive down inflation...

Incentivize U.S. industry and ingenuity again... all of which President Trump is doing. Don't forget that, under his administration, the U.S. has secured pledges of:

That's $2.6 trillion of incoming investments, with another $405.4 billion from a growing list of companies like Johnson & Johnson, Bristol Myers Squibb, Amazon, Elil Lilly, ADQ, Novartis, and Hyundai.

And every single bit of that activity is going to need to be contained in commercial real estate space – whether data centers, laboratories, production plants, warehouses, or office space.

All those employees will then need places to stay, which will require apartment buildings, manufactured housing, and single-family rental communities. And they'll need places to buy necessities and luxuries alike, whether online or in person, which means more retail plazas and even more warehouses.

Yet, again, Powell's current interest-rate position just isn't allowing much room to prepare for that boom. But, as mentioned above, that could be changing in the months ahead, too.

And while I'm sure we'll see CRE start to rise in 2026 and beyond...

It takes time to design, construct, and lease a new building. Usually years.

That means already standing buildings are about to get very valuable. Maybe not next month. Maybe not even by December.

But I've got my eyes wide open for the best and best-priced opportunities while these depressed conditions last. Buying opportunities like these – when negative sentiment leads to diminished supply ahead of new demand – don't happen often.

But they do happen...

Regards,

Brad Thomas
Editor, Wide Moat Daily

P.S. Don't miss my YouTube show this week, where I'll highlight four of my favorite real estate investment trusts. Subscribe HERE to The Wide Moat Show today.