Private real estate values likely to remain under pressure

Portfolio Perspective

February 16, 2024

What happened

Real estate values have been making headlines with some high-profile reports about both domestic and international banks taking hits on their real estate portfolios. Our view is that private real estate values are likely to remain under pressure considering their public REIT peers are still well below their prior highs, despite a double-digit rebound off the October lows, and private values tend to lag those of public markets. 

Bottom line

Since the highs in December 2021, REITs have fallen more than 20%. Given the diverse nature of real estate, there has been a wide dispersion in sector performance. Additionally, private real estate values tend to lag those in the public markets, and given the weakness in public REITs, we would expect this to continue to weigh on private market values and make headlines. We do not have a tactical allocation to REITs and would like to see better price trends and more attractive yield-based measures of valuation before getting more positive. Our alternative investments team sees value in select opportunistic private real estate strategies.

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