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Real Estate Finds Its Landing
Private real estate becomes a bigger object of investor affections .
By Christopher C . Williams
DESPITE ITS NAME , PRIVATE REAL EState isn ’ t a secret to many institutional and retail investors . They ’ ve poured billions into the alternative asset class through funds managed by firms such as Brookfield , JPMorgan , Invesco and Blackstone in recent years . At $ 20 trillion in assets , it ’ s the third largest asset class in the country behind equities and bonds , and it ’ s poised to draw even more attention , especially among investors seeking more income .
Several attributes make private real estate a prized neighborhood in the alternative space . Besides being a key income play , it ’ s a reliable hedge against inflation and offers added tax efficiency . Private real estate bulls say this is an attractive pitch amid investor worries about higher interest rates , inflation , lofty stock prices and uncertainty about tariffs and government spending . It ’ s also a diversifying asset , offering low correlation to bonds and stocks , as well as to REITs , its publicly traded cousins . Private real estate can also , depending on the investment strategy , provide alpha , or higher returns .
“ So you ’ re getting fixed-income-like cash flow and tax efficiency and getting no correlation to stocks and bonds , and that ’ s what ’ s so powerful about the combination of real estate in your portfolio ,” says Chad Tredway , a managing director and head of real estate ( Americas ) at J . P . Morgan Asset Management .
The opportunities stem in part from the re-evaluation that ’ s going on in the property sector . Commercial real estate value is going through a significant repricing after hitting its depths in the Great Recession in 2008 , and that presents investors with a “ generational opportunity ,” Tredway says . While stocks re- turned a whopping 50 % or more over the past two years — causing investors to fret about inflated prices — some private real estate values are down 20 % to 25 %, he says . As the market is being repriced — real estate value appreciated 6 % last year , say analysts — J . P . Morgan ’ s funds have taken in more than $ 1 billion across all of its real estate investment strategies over the last three to four months from investors looking to take advantage of this appreciation cycle .
Private Real Estate ’ s Competitive Returns
Private real estate has attracted so much interest and money from investors ( both institutional and individual ) because it can produce returns that outpace public markets , especially bonds . It also possesses “ durable income potential ,” as asset manager Invesco puts it .
In a report last year , Invesco , which manages $ 1.85 trillion in assets in New York , noted that , over the past 20 years , the asset class produced average income , or cash flow , returns of 5.35 % ( up to the end of December 2023 ), outpacing the 1.96 % for equities and 3.24 % for bonds .
54 | FINANCIAL ADVISOR MAGAZINE | MARCH 2025 WWW . FA-MAG . COM