The Lightstone Letter

Welcome to The Lightstone Letter, a biweekly newsletter from the investment team at Lightstone DIRECT. In each edition of The Lightstone Letter, we share exclusive content, real estate investing education, market perspectives, and new angles on our live investment opportunities.

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January 2026

The past several years have marked one of the most challenging periods for real estate investors in over a decade. Property valuations have slowly adjusted to a higher interest rate environment, and markets have worked through a surge of new multifamily and industrial supply stemming from the COVID-era development cycle.

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Yet despite these headwinds, property level fundamentals have been resilient, and we’ve seen this firsthand across our $12B portfolio at Lightstone. As an example, we executed 21 new leases in 2025 on over 1.1 million square feet of industrial space, and 19 out 21 of those leases were executed at lease rates above pro-forma with no rent concessions. Within our multifamily portfolio, rents grew 3.0% year-over-year, while net operating income increased 4.7%, exceeding our internal targets for the year.

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This combination of portfolio-level performance and broader market data gives us conviction that we are in the early stages of a real estate recovery. Several indicators support this view:

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Property Pricing Has Reset

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The Green Street Commercial Property Pricing Index (CPPI) shows that following valuation declines of approximately 20% in industrial and 35% in multifamily from 2022 through 2024, pricing has found a floor and begun to stabilize over the past 12 months. Additionally, industrial and multifamily transaction volumes have rebounded meaningfully, up 35% and 60%, respectively, since the Q1 2023 trough, suggesting that buyers and sellers are increasingly aligned on price and activity is beginning to normalize.

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Supply May Continue to Fall

Record supply levels in 2023 and 2024 created occupancy challenges across the Class A multifamily and industrial sectors, resulting in flat to negative rent growth across many markets. 

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However, higher interest rates and tighter financing conditions have brought new development activity to a standstill, with annual deliveries projected to decline over 65% by 2027. Over the next few years, we believe this limited supply pipeline will support rent growth and create a stronger foundation for robust cash flow and long-term capital appreciation.

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Capital Market Liquidity is Returning

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In addition to higher interest rates and elevated supply, regional banks largely pulled back from commercial real estate lending over the past several years, further constraining transaction activity and limiting price discovery. 

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At Lightstone, however, we are seeing renewed engagement from multiple lenders and transactions beginning to clear at more rational pricing levels.

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No cycle perfectly echoes the past. That said, our 40 years of experience tells us that periods like this tend to reward real estate operators who can exercise patience and be disciplined on price. From our perspective, we’re entering a period where not every sector or market will perform the same, and selectivity will matter more than it did in the previous cycle.

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We will continue to focus on acquiring assets at an attractive discount to replacement cost with strong going-in yields. We seek to drive returns through light value-add strategies, focused on targeted capital improvements, and mark-to-market leasing strategies. Our approach prioritizes durable cash flow and downside protection, with multiple paths to value creation.

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Our 2026 Market Outlook will substantiate this thesis using first-party observations from Lightstone’s portfolio and operating platform.