The pendulum problem: When markets feel worse than they are

This article was produced in partnership with Hazelview Investments.

Markets always feel most fragile when you are living through the disruption. In 2008 and 2009, the global financial crisis created real fear about the stability of the system. At the start of the pandemic, the shock was so sudden that entire sectors seemed at risk of permanent damage. Those moments carried genuine uncertainty, and they shaped behaviour long after the immediate crisis passed.

But as Michael Tsourounis, managing partner and chief investment officer of Hazelview Investments points out, time usually tells a different story than the one investors tell themselves in the moment. The world did not stop after the financial crisis, and it did not stop after the pandemic. Economies recovered. Cities adjusted. Capital returned to the markets that were written off too quickly.

For Tsourounis, the lesson is simple: urgency and reality are not the same. Investors may absorb the tone of the moment and confuse it with a long-term outcome. “When you are in the thick of it, it is easy to think the extreme scenario is the final one,” he says. “Most of the time, the pendulum has swung too far.”

Nothing illustrated this more clearly than the reaction to the office market after April 2020. The conclusion then was swift. Remote work would replace offices. Corporate real estate would be pushed aside. For several years, the word “office” was enough to shut down a conversation. Yet in other global markets Hazelview tracks, offices never emptied. Hamburg and Hong Kong saw steady attendance. Even in Canada and the United States, companies slowly recognised that collaboration, training and team culture relied on more than video screens. The environment changed, but the category did not disappear.

Housing has gone through a similar shift in tone. Rents have softened in some cities. Vacancies have risen. New supply has entered the market. It is natural for investors to hesitate when sentiment turns negative. But Tsourounis believes, “Every headwind creates an opening somewhere else,” he says. “Today’s softness is creating opportunities for those who can look past the next twelve or eighteen months.”

A long view grounded in daily detail

Hazelview Investments, the firm Tsourounis helps lead, has built a strategically integrated investment management platform that provides single-point access to both private and public real estate markets, with in-house expertise in development and property management capabilities. That integration gives the team a daily read on both the financial and human sides of the business.

Thousands of interactions with residents across its Canadian multifamily portfolio shape how the firm thinks about building performance, customer needs and durability. At the same time, its global securities desks in Toronto, New York, Hamburg and Hong Kong provide real-time insight into how companies around the world are responding to shifting market conditions.

This blend of ground-level information and global perspective has shaped Hazelview’s conviction in housing, even as headlines focus on short-term weakness. Rents in some cities have softened. Supply has increased. Construction activity has slowed. For many investors, the instinct is to step back.

Tsourounis sees something different. Softer rents, lower construction costs, and falling interest rates have combined to create a more favourable environment for new development than many realize. The supply overhang drawing so much attention today, he argues, is unlikely to last long. Skilled labour shortages, long lead times, and population growth mean Canada could face a structural shortfall once the current wave of projects is absorbed.

This is why Hazelview continues to advance a $12.5 billion national development pipeline and deepen its focus on rental housing. When population growth resumes and immigration stabilizes at sustainable levels, the country will need thousands of new homes. Those homes cannot be built overnight. They require early commitments, skilled workers, materials, capital and time. “We had a conveyor belt of supply for many years,” Tsourounis says. “When you look ahead five or six years, that conveyor belt looks much thinner.”

If a developer’s projections appear too optimistic, Hazelview can participate on the lending side instead of the equity side. If one region shows stress, securities research from another can offer perspective. If a product does not hold up well in Hazelview’s own buildings, it will not appear in new developments. This interplay between disciplines produces the balance Tsourounis believes long-term investors need: optimism grounded in data, and conviction that has been checked against reality.

Housing as the foundation of a long-term allocation

Technology will reshape parts of real estate. Retail will evolve. Office will continue to adapt. But the need for housing sits outside those cycles. People live, work and learn from their homes, regardless of how their jobs or shopping habits change.

For financial advisors building multi-year strategies, Tsourounis encourages a view that separates signal from noise. Real estate cannot be traded like a theme. It requires time, diversification and a belief in the fundamentals that underpin demand. In Canada, those fundamentals lead back to population growth, constrained labour capacity, and the simple truth that shelter remains the most essential form of real estate.

Hazelview’s approach reflects that belief. It is patient, detail-oriented and comfortable investing in periods when others hesitate. History suggests that those are often the moments when future value is created.

Learn more about Hazelview Investments Point of View on real estate