Real estate liquidity is continuing to normalize across several key indicators during the third quarter, according to the latest Madison Real Estate Liquidity Index from private equity firm Madison International Realty. The index measures how easily asset owners and investors can enter and exit real estate limited partnerships.
The third-quarter liquidity score was 35.6, marking the sixth consecutive quarter of improvement and the highest reading since the first quarter of 2022, when the Federal Reserve began raising interest rates. While readings in the 40s and 50s would indicate a full recovery, the index shows consistent improvement, having risen nearly 80 points in under two years. This follows the worst period of illiquidity since the Global Financial Crisis.
“Following the very challenging commercial liquidity conditions brought on by the COVID-19 pandemic and the rate hikes of 2022-23, the latest reading of Madison’s Liquidity Index should give market participants cause for cautious optimism in 2026, especially as debt markets remain liquid and private equity activity heats up following the Fed’s December rate reduction,” said Christopher Muoio, managing director and head of data and research at Madison International Realty.
According to the report, improvements are being driven by growth in U.S. and European real estate loan origination and healthy U.S. public markets activity. Some indicators remain muted, however, including capital formation measures such as dry powder levels and elongated fund-raising timelines.
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