As published in PREA Quarterly, Winter 2023
The U.S. economy has been marked by mixed economic growth results, elevated inflation, and higher interest rates. The confluence of these factors has resulted in increased uncertainty surrounding the economic outlook. At the end of 2022, the Bloomberg consensus forecast survey placed the odds of a U.S. recession within the next 12 months at 70%. Amid this economic uncertainty, U.S. commercial real estate operational performance has generally been strong, but total return and valuation metrics between public and private real estate have diverged. This uncoupling has increased the attractiveness of public equity REITs because they provide tactical and strategic opportunities to “complete” real estate portfolios.
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