Big UK Investors Prepare to Buy the Dip in US Property

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Legal & General and Schroders eye U.S. real estate recovery, avoiding office sector in favor of residential assets.

LONDON — British investment giants Legal & General (L&G) and Schroders are positioning themselves to take advantage of falling U.S. property prices, but with a notable focus away from the struggling office sector. Both fund managers, overseeing a combined $2.5 trillion in assets, are preparing to invest hundreds of millions of dollars into the U.S. commercial real estate market, betting on a recovery fueled by anticipated interest rate cuts.

L&G CEO António Simões emphasized the company's strategic focus on U.S. real estate, describing it as a key expansion area despite global property market volatility. “The market's fundamentals remain strong,” Simões said, highlighting expectations that falling borrowing costs will bolster investment prospects.

Avoiding Office Sector Challenges

While the U.S. property market as a whole has taken a hit from higher interest rates and the shift toward remote work, the office sector remains particularly troubled, with investors wary of oversupply. Instead, L&G and Schroders are channeling their investments into sectors that have shown resilience, particularly residential rental properties. Rental homes across the country, which have performed better than office spaces post-pandemic, are a primary focus for L&G as it builds its U.S. real estate equity portfolio.

U.S. Market Resetting Faster Than Europe

Property analysts note that the U.S. real estate market tends to reset more quickly than its European counterparts, with lenders and developers more agile in repricing assets. This faster adaptation is attracting overseas investors eager to capitalize on rebounding values as interest rates begin to ease. Last week's 50 basis point rate reduction by the U.S. Federal Reserve further improved the investment outlook.

L&G, which has already assembled a 20-person real estate team in Chicago, aims to significantly expand its equity portfolio and real estate debt business in the coming years. The company is targeting rental properties and other sectors that have fared better amid the market turbulence.

As the U.S. market shows signs of recovery, British investment managers are seizing the opportunity to buy the dip, confident that a rebound is on the horizon, but they are staying cautious of the hard-hit office sector, focusing instead on more stable real estate classes like rental homes.