Investors are understandably concerned about U.S. commercial real estate (CRE), given the rapid changes in interest rates since the beginning of 2022 and the recent banking sector stress. Indeed, the Federal Reserve now expects a recession, which we anticipate will lead to declines in real estate prices in the near term. In the medium term, however, we think that secular tailwinds will continue to benefit select real estate sectors, such as industrial, multifamily housing and some niche segments.

Furthermore, we do not think that the current environment presents a structural problem with CRE, which is not immune from recessionary pressures but typically performs well during the early recovery phase of the cycle. Indeed, U.S. REITs have outperformed broader U.S. equities more than 80 percent of the time since 1975 during the early recovery phase. Thus, we think cyclical pressures will likely create opportunities in sectors we prefer and advise investors to selectively invest i