Listed real estate investment trusts (REITs) are likely nearing an inflection point for a new cycle of outperformance. In addition to moderating interest rate headwinds, we also believe resilient property sectors and attractive valuation discounts are creating a compelling opportunity to own REITs.
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This month’s edition provides you with bite-sized updates on real estate, infrastructure, private equity and private credit. Despite continuing market uncertainty, private markets are embracing the structural changes reshaping our world. For example, decarbonization and clean energy remains one of the most popular target sectors for infrastructure, despite different doom and gloom outlooks for various reasons.
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Four years ago, Listed Real Assets (LRA) boasted some of the strongest long-term risk-adjusted returns of any asset class. However, just as LRA was gaining industry recognition as a defined sector, it has endured two years of deeply troubled performance. Today, the picture is rather different. Will a difficult period dampen sentiment towards the sector? Or will investors see this, instead, as a time to ‘lean in’?
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This month, in our Insights into Private Markets (IPM), we bring you short updates into private credit, real estate and infrastructure. In our outlook into private credit, we explain why we have recently made opportunistic allocations to short duration homebuilder finance and reinsurance / Insurance Linked Strategies (ILS).
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Following the Great Financial Crisis (GFC) of 2007-2008, “retail” became synonymous with “mall”. This misleading equation grew out of private capital’s shorthand for various shopping center formats, including neighborhood centers, power centers, lifestyle centers, single tenant retail, and yes, malls, among others. By lumping them together, they failed to differentiate retail into its component parts, which have proven historically to perform very differently. This paper focuses on the retail subsector with the strongest and most consistent track record—necessity retail.
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Despite the most substantial mortgage rate impact on homebuyers in the modern history of housing, US single-family home prices are up roughly 5% year-to-date through the third quarter. The surprising resilience of home prices has confounded housing observers and led most housing narratives to focus in on the mortgage rate lock-in effect as the root cause of rising home prices. However, structural supply-demand imbalance is the reason home prices are rising, not higher mortgage rates.
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To our surprise, we found there has never been an authoritative methodology behind the commonly used real estate categorization of “gateway markets” or “core property types.” We believe both definitions should be based on high transparency and high stability of expected returns and outline our recommendation in this report.
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AI is transforming the data center, ushering in a new era in data center design and operation. The unique demands of AI workloads, from increased power consumption and cooling requirements to the need for continual learning and updating, require a reimagining of traditional data center architectures. This evolution presents an opportunity for innovation and growth in the data center industry. As AI continues to advance, it will be imperative for businesses and technology leaders to stay abreast of these changes and adapt their strategies accordingly.
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We focus on ten key trends shaping real estate investor and occupier attitudes over the coming year and beyond. The ten themes span geographies, ranging from the macro, like climate and capital markets, to more micro, such as how rising insurance premiums may impact returns. We zoom in on evolving real estate sector trends and explore the case for vertical farming. We also speculate on the role AI will have on the asset class and learn from a few recent high profile real estate company failures. We conclude with our preferred investment strategies and how these may tilt in 2024.
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The final publication in our 2024 outlook series explores Strategic Capital — a groundbreaking strategy positioned at the crossroads between multiple facets of traditional real estate investing. In this paper, we offer a fresh perspective, weighing the pros and cons of investing in singular assets versus dynamic platforms, and spotlight sectors like healthcare and data centers as key areas of opportunity. “Powered by Agility ” delves into the strategic advantages of consolidating fragmented markets and embracing the role of a liquidity provider, offering valuable insights and perspectives into what we’ve dubbed a white space within the real estate investment landscape.
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