Quick Answer: Is Now a Good Time to Buy Real Estate in the US?

Yes—with careful underwriting and a sharp eye on financing and execution risks, select opportunities in US commercial real estate (CRE), especially in multifamily and distress-driven sectors, remain attractive despite persistent high interest rates and market uncertainties. Apollo’s liquidation plan coupled with a significant capital return dividend signals an evolving landscape, encouraging investors to reassess value, risk tolerance, and timing.

Why This Matters Now: The Changing Dynamics in CRE and Apollo’s Role

Recently, Apollo Real Estate Income Trust (ARI) announced a liquidation plan alongside a large capital return dividend, reshaping the investment thesis for Apollo and signaling broader market shifts. This move emerges amid sustained elevated interest rates, fluctuating cap rates, and increasing CRE distress exacerbated by geopolitical and macroeconomic pressures, including inflation and uncertain FED policies.

This development is a strong indicator to investors that restructuring and capital returns can unlock value in a cooling CRE market. It also reflects changing fundamentals that are critical for those underwriting transactions: liquidity events, balance sheet optimization, and operational execution are now key pillars alongside property-level fundamentals.

What Happens to Cap Rates When Interest Rates Stay High?

Persistent high interest rates create upward pressure on cap rates as borrowing costs rise, compressing property valuations. While higher cap rates historically signal better income yields, in the current environment they reflect increased risk premiums. Investors must triangulate cap rates with debt pricing, tenant credit quality, and market fundamentals to avoid overpaying.

From experience underwriting real transactions, cap rates in stable markets like multifamily often hold firmer than in exposed sectors such as office and retail, but both require rigorous stress testing of financing scenarios amid higher rates to identify execution risk. For instance, mispricing refinancing risk can derail projected returns, especially when interest coverage ratios tighten.

Are NNN Leases Still Safe? Where Is CRE Distress Creating Opportunity?

NNN leases retain appeal due to stable income and tenant responsibility for operating expenses; however, rising delinquencies in office and retail tenants tied to pandemic aftermath and shifting consumer behavior introduce credit risk. Investors must conduct enhanced due diligence on tenant health and lease enforceability.

Current CRE distress is concentrated in secondary and tertiary office markets with weak leasing pipelines and in shopping centers struggling with ecommerce competition. Conversely, multifamily properties in high-demand regions and select industrial assets present resilience and attractive entry points, often with repositioning upside or operational improvements enabling enhanced returns.

How Do Investors Underwrite Multifamily Today? What Should Buyers Ask?

Multifamily underwriting now hinges on conservative rent growth assumptions, vacancy stress tests, and detailed capital expenditure projections given inflation and supply chain volatility. Investors should interrogate property-level operational efficiency, tenant mix, and local demand drivers rather than relying solely on historical NOI metrics.

Critical questions buyers must ask include:

• What is the secured debt structure and what are refinancing risks at maturity?
• How sensitive are cash flows to economic downturns or rent control regulations?
• What is the execution risk if repositioning or capex plans are required?
• How will rising operating expenses and property taxes impact net cash flow?
• Are there concentrated tenants or single-industry exposures increasing risk?

Underwriting must integrate a holistic view of market dynamics, financing terms, and operational capabilities.

US Commercial Real Estate Crisis and the Investment Visa Angle

The ongoing US CRE pressure, dubbed by some as a ‘crisis’, stems largely from elevated interest rates and capital repricing, depressing values in certain sectors. However, this disruption creates avenues for patient capital and active managers to capitalize on distressed asset sales and recapitalization opportunities.

Simultaneously, foreign investors leveraging the US Real Estate Investment Visa (EB-5) program are reassessing project feasibility given tighter financing and longer hold periods. Developers and investors must align exit timelines with visa requirements, carefully navigating immigration-linked investment risk.

Expert Take: Navigating Financing and Execution Risk in Today’s Market

From direct underwriting experience, today’s CRE deals demand a dual-lens approach: first, rigorous financing risk analysis including stress tests against rate shocks and covenant breaches; second, practical execution risk assessment focusing on asset management capability, lease renewal assumptions, and market-specific demand trajectories.

Apollo’s liquidation and capital return plan crystallize this reality: liquidity events are vital to mitigating market uncertainties, but they also highlight the imperative for due diligence beyond headline yields. Investors must cultivate flexibility and operational discipline to optimize returns in an evolving US CRE environment.

Summary

In conclusion, while the US commercial real estate landscape is tense with rising rates and sector-specific distress, selective buying remains viable with disciplined underwriting. Apollo’s liquidation plan and capital return dividend spotlight tactical shifts where liquidity and balance sheet management interplay with traditional real estate investing. Investors and developers must prioritize financing robustness, tenant quality, and operational precision to capitalize on present opportunities and mitigate risks.