The private commercial real estate market has dominated media headlines and has been slow to adjust reported values as the macroeconomic background changes. This is the opposite for the listed/public market, which is forward looking, being priced daily in stock markets, with valuations very much already reflecting the negative impact of higher rates on underlying property values. This means listed real estate investment trusts (REITs) are trading at wide discounts to private asset values, having already “priced in” the impact of higher rates, and today stands to benefit from a reversal in the direction of interest rates.

How do we evidence this? One key indicator is that the private real estate sector is taking advantage of the significant valuation gap between private and listed real estate, to reap the existing value in listed REITs today. Recently, Blackstone, the largest private operator, announced it is acquiring listed upscale coastal apartment REIT Apartment Income