Brian Jones, managing director and portfolio manager at Neuberger Berman, participated in a video interview in conjunction with Nareit’s REITwise: 2023 Law, Accounting & Finance Conference held March 21-23 in Phoenix, Arizona.
Jones said that after a long period of low interest rates, higher interest rates are now having a profound impact on real estate capital markets and REITs.
“When we think about the change in the rate environment, it really has turned something that was a tailwind for REIT markets and real estate values into more of a headwind,” he said.
Jones also said that inflation is generally a positive trend for real estate in terms of the ability of landlords to capture higher inflation in the form of higher rental rates.
“When we think about inflation, we think about it as the tension between the supply of real estate sub-sectors and the demand from tenants for space in those sub-sectors,” he noted.
Jones said that the sectors with the best inflationary tensions are the ones with the strongest demand relative to the supply of real estate. The sectors with the most recent stand-out demand tension, he added, are: industrial warehouses, driven by the growth of e-commerce; residential, driven by a tailwind from increasing homeownership costs; and self-storage, driven by how the work from home environment has led to people de-cluttering their houses.
Jones added that evaluating companies based on social or environmental criteria is an evolving area for Neuberger Berman, but that the firm has always evaluated governance issues.