Fund Manager Sees Potential for Increased Real Estate Volatility as Valuations Rise

Sherry Rexroad, chief investment officer with BlackRock Global Real Estate Securities, joined REIT.com for a video interview at REITWeek 2016: NAREIT’s Investor Forum at the Waldorf Astoria New York.

Rexroad offered perspective on the level of volatility in commercial real estate markets. She stressed that volatility has largely been driven by macroeconomic and monetary policy, rather than real estate fundamentals.

Rexroad expressed concern that increased valuations will result in greater volatility. In real estate and the broader equities market, “you could see big movements in positions, as well as pricing,” she said.

Meanwhile, transaction volume remains high, although the level has moderated somewhat from last year’s peaks, Rexroad said. Cap rates have been stable, she noted, which means demand is still “very good.”

Transaction volume in the United States this year is about 20 percent less than last year, with volume in Europe about 40 percent lower than a year ago, Rexroad said. Australia, meanwhile, is having a “banner year” and Chinese investment is still strong, she noted.

Rexroad said she expects Chinese investors to continue to seek stability outside of their own region. Chinese investment represents about 10 percent of U.S. transaction volume, she pointed out. “I think that’s here to stay, and it’s helping to support our valuations,” she said.