The Federal Reserve has started an easing cycle, and major UK asset management giants are returning to the US commercial real estate market.

British investment management companies Legal & General and Schroders global stated in an interview that they will invest hundreds of millions of dollars in commercial real estate in the United States, but essentially avoid the hard-hit office sector. The fund managers, who oversee assets of over 1.9 trillion pounds ($2.5 trillion), said they have each set up US real estate teams to drive this process, expecting real estate prices to rebound with the help of falling interest rates. Legal & General CEO Antnio Simes stated that US real estate is an important expansion market for the company, and added that the market fundamentals remain strong. Rising borrowing costs post-pandemic and the widespread adoption of remote work have impacted global real estate prices, with the US office market being particularly hard hit, causing investors to remain concerned about oversupply. However, expectations for further interest rate cuts improved investment prospects after the Federal Reserve announced a substantial 50 basis point rate cut last week. Real estate analysts also noted that the US market tends to adjust faster than mainland Europe, with lenders and developers quicker to reprice assets. Legal & General stated that the company plans to expand its nascent US real estate equity 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 asset management company has set up a team of around 20 people in Chicago to help drive equity investments, focusing on rental housing across the US that outperforms office properties. Schroders global stated that its goal is to expand its emerging US real estate equity portfolio from its current tens of millions of dollars to hundreds of millions in the medium term. The company recently invested in the Pan-American Data Center portfolio, one of its initial attempts. Schroders global's Co-Head of Capital Private Debt and Credit Alternatives, Michelle Russell Dowe, stated, "We believe the Fed beginning to normalize rates is key to unlocking some of the pent-up demand." Schroders global also identified opportunities in the real estate debt sector as banks retreat due to stricter capital requirements. Schroders global's investor in New York, Jeffrey Williams, stated, "There's a huge gap in financing, and other lenders will have to step in 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 of British insurance company Phoenix, which manages around 290 billion pounds in assets, also stated that they plan to "invest heavily" in US real estate, but refused to disclose details of the potential investment size.