The Federal Reserve initiates an easing cycle, British asset management giants are returning to the US commercial real estate market

According to the financial news app Zhitong Finance, British investment management company Legal & General and Schroders stated in an interview that they will invest hundreds of millions of dollars in commercial real estate in the United States, but largely avoid the hard-hit office sector.

These fund managers, overseeing assets of over £1.9 trillion (US$2.5 trillion) collectively, have each set up teams for U.S. real estate to drive this process, expecting real estate prices to rebound with the help of falling interest rates.

António Simões, CEO of Legal & General, stated that U.S. real estate is an important expansion market for the company, and described the market fundamentals as still strong.

The rise in borrowing costs post-pandemic and widespread adoption of remote work have impacted global real estate prices, with the U.S. office market particularly hard hit, as investors remain concerned about oversupply.

However, after the Federal Reserve announced a significant 50 basis point rate cut last week, expectations for further rate cuts have improved investment prospects.

Real estate analysts also noted that the U.S. market tends to adjust faster than the European continent, with lending institutions and developers more quickly repricing assets.

Legal & General announced plans to expand its nascent U.S. real estate equity investment portfolio by hundreds of millions of dollars in the coming years, while increasing similar risk exposures in its more mature real estate debt business.

The fund management company has assembled a team of about 20 people in Chicago to help drive equity investments, focusing on rental housing across the U.S. that outperforms office buildings.

Schroders stated that its goal is to expand its emerging U.S. real estate equity investment portfolio from the current tens of millions of dollars to the mid-hundreds of millions. The company made an investment this month in the Pan-American data center portfolio, one of its initial forays.

Michelle Russell Dowe, Co-Head of Schroders Capital Private Debt and Credit Alternatives, said, "We believe the Fed's return to normal rates is key to unlocking some of the pent-up demand."

Schroders also identified opportunities in the real estate debt space as banks retreat due to stricter capital requirements.

Jeffrey Williams, a Schroders investor based in New York, said, "There is a huge gap in financing, and other lending institutions will have to fill that gap."

The company stated that it is not against office investments, but they must be high-quality development projects.

The fund department under British insurance company Phoenix, managing around £290 billion in assets, also expressed plans to "heavily invest" in U.S. real estate, but declined to disclose details on the potential investment scale