Edward F. Pierzak

Data from CoStar highlight the current state of the commercial real estate market.

Space market fundamentals can differ markedly across property types. Net absorption (demand) and net deliveries (supply) for the four traditional property types (retail, apartments, industrial, and office) highlight the ups and downs of the space markets and can illustrate excess net demand (net absorption less net deliveries) for each sector.

Nareit research has shown that REIT total returns have tended to bounce back and even surge after periods of significant REIT underperformance relative to private real estate.

No Fed interest rate cuts? No problem: With their disciplined balance sheets, U.S. public equity REITs may not be immune from higher interest rates, but they are reasonably well-insulated from them. 

Although many institutional investors focus their property investment strategies on private equity real estate, current and expected market conditions tend to favor public real estate.

During this period of divergent public and private property valuations, the commercial real estate mortgage market has been marked by higher interest rates and stricter underwriting standards.

A recent Nareit market commentary highlighted that the “ostrich effect,” an investor behavior where risky situations are avoided by pretending that they do not exist, may aptly describe the attitudes of many private institutional real estate investment managers and appraisers when it comes to their valuation practices.

Norges Bank Investment Management (NBIM) recently published a discussion note, “Drivers of Listed and Unlisted Real Estate Returns,” which analyzes the drivers of U.S. public and private real estate returns and evaluates real estate exposures in the context of a diversified investment portfolio.