Edward F. Pierzak

The game-on, game-off nature of tariff actions has introduced uncertainty into the U.S. financial and economic markets.

During the current lingering public-private real estate valuation dislocation, REIT implied cap rates have reacted to movements in the U.S. 10-year Treasury yield in meaningful ways.

The lingering public-private real estate valuation divergence has been disruptive, but it continues to offer potential buying opportunities for investors. 

Although the lingering CRE valuation divergence has been disruptive, it has created opportunities for investors and benefited REITs. 

Space market fundamentals can differ markedly across property types

While today’s property market tends to be characterized by supply–demand imbalances, declining/low occupancy rates, and moderating/low rental growth rates, signs of stabilizing fundamentals have started to percolate.

While publicly traded equity REIT performance has recently been exhibiting an inverse relationship with U.S. 10-year Treasury yield movements, this has not always been the case.

Rising interest rates worry real estate investors. Their fears are rooted in the view that interest rate increases will result in rising cap rates and, all else being equal, declining property values.

REITs are real estate with attractive performance attributes. In research sponsored by Nareit, CEM Benchmarking took a comprehensive look at investment allocations and realized investment performance across 12 asset classes over a 25-year period (1998–2022) using a dataset covering more than 200 U.S public- and private-sector pensions with $4.1 trillion in combined assets under management (AUM).

Historical data show that, on average, real estate has enjoyed solid total returns across different interest rate regimes with REITs consistently outperforming their private market counterparts.