Allan Swaringen, managing director at LaSalle Investment Management, told the REIT Report podcast that the outlook for core real estate fundamentals remains positive against a backdrop of continued elevated interest rates.
“We have a sense that interest rates are going to be higher for longer, and long-term growth is going to be driven by rent growth…we still believe the case for core real estate is quite strong,” Swaringen said.
“Investors are still looking for durable, reliable income, and core real estate has been a source of that for a very long time,” he added.
Turning to individual sectors, Swaringen noted that the open air, grocery anchored retail sector has had little new development since the pandemic, “so you're seeing strong occupancies and attractive rent growth there.”
The case for renters, both in apartments and single family rentals, is also quite strong, he said. Meanwhile, outpatient medical real estate is supported by long-term leases that attract high quality doctor practices with five, 10, or 15-year leases. The large aging demographic, and its need for health care services, is an additional factor supporting growth.
Turning to industrial, Swaringen pointed out that the growth of AI and data centers has resulted in a growing need for offsite storage for building materials. “Both the lower capital needs and the higher cash flows coming out of the industrial market really is making that property type much more attractive for core investors who are looking for that durable, reliable income stream,” he said.
Swaringen, chair of Nareit’s Public Non-Listed REIT Council, also noted that the sector is seeing continued growth, alongside the introduction of property specific and debt strategies.