Thomas Cioffe CEO at Cioffe Enterprises, Inc.
March 2025
As we step into the second quarter of 2025, there are compelling reasons to believe that private assets and real estate, in particular, are well-positioned for another year of strong performance. A confluence of factors, both ongoing and emerging, suggests a favorable environment for growth in the sector.
1. Falling Interest Rates Will Drive Value Growth
Real estate values and interest rates share an inverse relationship. When the Federal Reserve began raising rates in 2022, it applied downward pressure on real estate valuations. Now, as the Fed shifts course and gradually reduces rates, we are already seeing a corresponding uplift in property values.
While debates persist about the exact pace and scale of future rate cuts, the Fed has signaled its intention to lower rates over the next 24+ months. If this trajectory holds, it could catalyze further growth in real estate values, creating opportunities for savvy investors.
2. Real Estate Prices Remain at Historic Lows
Despite the stock market’s impressive 57% gain over the past 24 months, real estate prices have remained close to multi-decade lows. This divergence is unusual; historically, real estate and stocks tend to move in tandem.
This gap makes real estate particularly attractive today, especially compared to the stock market, which many analysts believe is overvalued. For value investors, the opportunity to acquire high-quality assets in growing markets at prices below replacement cost is a rare and promising prospect.
3. Undersupply is Driving Demand
In real estate, supply and demand dynamics are king. When demand exceeds supply, rents rise, and property values follow.
After a surge of new construction during the pandemic, rising interest rates have caused a steep decline in new development activity. Multifamily and industrial construction starts are now at their lowest levels in nearly a decade. With demand for housing and industrial spaces continuing to grow, the resulting undersupply could drive significant rent and property value increases over the next several years.
4. Policy Changes Could Add Momentum
Shifts in federal policy under the new administration are also likely to impact real estate. Potential deregulation of the financial sector, changes to tariffs, and adjustments to immigration policies could influence market dynamics. While these policies may lead to higher costs for new construction, they could also increase investment demand and exacerbate existing supply constraints, further supporting asset appreciation.
Pursuing Opportunistic Multifamily and Build-to-Rent Investments
As we look to capitalize on these trends, we plan to continue pursuing opportunistic multifamily acquisitions. Additionally, we are increasingly focusing on single-family homes built-to-rent, a strategy that aligns with shifting housing preferences among millennials.
This demographic cohort has shown a growing desire to live in single-family homes without the financial commitment of homeownership. By addressing this demand, we not only provide a solution to a market need but also position our portfolio to benefit from the long-term stability and growth associated with this asset class.
Balancing Opportunity with Risk
As we look ahead, the stars may be aligning for real estate investors. However, it’s critical to remember that no investment comes without risk. While real estate values appear well-positioned for growth, market timing is notoriously challenging, and external factors can always shift the landscape.
The recent performance of the stock market underscores the need for caution. Though it has delivered returns in two years that typically take a decade, its valuation metrics—such as the Shiller PE ratio—are now at levels reminiscent of the dot-com bubble. By contrast, real estate values have already absorbed the impact of rising rates, suggesting a more favorable risk-reward profile.
A Diversified, Long-Term Strategy
We remain confident in a diversified, long-term approach to investing. A balanced portfolio that includes well-priced real estate, high fixed-income investments, and forward-looking technology companies—particularly those harnessing AI—offers a strong foundation to capture future upside while mitigating risk.
As we navigate the opportunities and challenges of 2025, we invite you to share your thoughts and join the conversation. How are you positioning your portfolio for the year ahead?
Exciting Innovation in AI
We are pleased to note that this article was written with the support of one of our portfolio companies investing in AI. We are proud to own 10% of the first round of funding—a truly exciting opportunity that exemplifies the innovative and forward-thinking approach we strive to bring to all our investments.
Cioffe Enterprises, Inc. 