Real Estate Pulse - Q4 2024
Download the full article
US CRE Producing Positive Returns
The combination of ongoing solid economic growth, moderating inflation and the first interest rate cut of the cycle largely explain the improvement in Commercial Real Estate (CRE) performance. Signals of a cycle bottom have been emerging since the beginning of 2024. More recently, roughly half of investors polled by CBRE are expecting a big improvement in transactions during the first half of 2025.
Additional highlights
- Investment performance for US CRE improved solidly in Q3 2024 according to updated NCREIF data. Total return for all properties on a cumulative basis was positive (0.83%) for the first time since mid-2022. Third quarter results showed shrinking negative capital appreciation compensated by ongoing solid income return.
- Among the eight sectors now contained in the Expanded National Property Index (NPI), only two report negative capital appreciation, office (-2.37%) and seniors housing (-0.44%).
- After seven quarters of shrinkage, property transactions improved during the second and third quarters of 2024. However, volumes remain well below the pre-COVID pace recorded in 2019.
- NCREIF capital appreciation reached positive territory in Q3 2024 for all the major sectors except office and the small seniors housing sector.
- Using transactions data, RCA reports that property prices slipped -0.6% in the third quarter. Separately, office pricing improved 0.2% and industrial pricing strengthened 1.3%.
- Third quarter data show fewer metros reporting rising apartment, industrial and office vacancy rates compared with the second quarter. However, industrial vacancy rates continued to tick up for almost all fifty top metros albeit slightly fewer versus the second quarter.
Download the full article
Read our thoughts and reflections with regards to the real estate market by downloading our latest newsletter.
Additional insights
Combatting Complexity with Enhanced Beta
Multi-asset
Enhanced indexing offers potential outperformance through low risk methods that traditional passive managers forego. Selectively utilizing derivative exposures for passive investments can also at times add value in markets where the investor receives a material funding spread. However, the magnitude of the opportunities, particularly in derivatives funding markets, will vary across assets and time.
Borrowing Brilliance – Advantages in Fixed Income Portable Alpha
Active Fixed Income
While we are generally supportive of portable alpha, clearly not all implementations are created equal. Partnering with a portable alpha manager who intimately understands the trade-offs inherent in the approach may afford distinct advantages for retaining as much outperformance as possible for the overall portfolio.
Views and opinions expressed herein are as of the date published and may change based on market and other conditions. The material contained here is confidential and intended for the person to whom it has been delivered and may not be reproduced or distributed. The material is for informational purposes only and is not intended as a solicitation to buy or sell any securities or other financial instrument or to provide any investment advice or service. Legal & General Investment Management America, Inc. does not guarantee the timeliness, sequence, accuracy or completeness of information included. Past performance should not be taken as an indication or guarantee of future performance and no representation, express or implied, is made regarding future performance.
Unless otherwise stated, references herein to "LGIM", "we" and "us" are meant to capture the global conglomerate that includes Legal & General Investment Management Ltd. (a U.K. FCA authorized adviser), Legal & General Investment Management America, Inc. (a U.S. SEC registered investment adviser) and Legal & General Investment Management Asia Limited (a Hong Kong SFC registered adviser). © 2025. All rights reserved. No part of this publication may be re-produced or transmitted in any form or by any means, including photocopying and recording, without the written permission of the publishers.