While the darkest clouds of the pandemic appear to have lifted, the path ahead for the economy and real estate performance remains unclear, according to Jacques Gordon, global head of research and strategy at LaSalle Investment Management.
Speaking at the Opening General Session of Nareit's REITworks: 2021 Conference, Gordon highlighted several macro themes governing the economic and real estate landscape today. Those themes include: the changing role of the federal government; monetary and fiscal policy remaining in flux; the growing drumbeat of ESG; increased climate risk analysis; and the redistribution of economic activity.
Among Gordon’s observations:
- Despite the current uncertainty, REITs have performed particularly well in 2021, outperforming both the S&P and the Russell 1000.
- Voluntary adoption of ESG policies is moving ahead rapidly, potentially outpacing regulatory changes.
- In terms of workplace activity, “we’re not back to normal—we’re not even close.” A return to more normal levels of activity is unlikely to occur before mid-2022.
- Dry powder in the capital markets remains near an all-time high and transactions could hit $1 trillion in 2021.
- Debt markets are “incredibly liquid and active” at this time.
- New and emerging real estate sectors are “where the action is,” accounting for a growing share of investor portfolios. Interest in these sectors is only in its third inning, with “a long way still to go.”