CBRE IM exec sees reasons to be optimistic about real estate

Real estate managers have reason to be cautiously optimistic, and while questions still remain regarding interest rates and valuation corrections, there is growing clarity on both, said Julie Ingersoll, chief investment officer for Americas direct real estate strategies at CBRE Investment Management.

"I'm feeling a little more cautiously optimistic today than I did three months ago, and there's a couple of reasons for that," said Ingersoll in a Jan. 31 interview at the iConnections Global Alts 2024 conference in Miami. "Mostly because we've seen public REITs really come off their trough in terms of pricing. They're still not all the way recovered, but we've seen a bit of a rebound there."

Ingersoll said that all she and her team are talking about is where the Federal Reserve will go with rates: "When are the cuts? How big are the cuts? Are they 75 basis points? Are they 150? But that's versus how higher for how longer are we going to be."

"And what are the valuation corrections that are going to be needed? If you believe in a 4% 10-year Treasury or you believe in a 3.5% 10-year Treasury. Those are very different outcomes based on where today's valuations are."

"We've already started to see cracks in capital structures, so this has been a correction of interest rates, a correction of broken capital structures and some clear and undeniable distress, and those are the things we can see," she said.

However, Ingersoll said we may be getting a clearer picture on interest rates soon.

"That allows us to peg where valuations might actually be troughing and might have actually, hopefully, happened in 4Q of 2023, maybe in this quarter," Ingersoll said.

She added that while real estate credit has driven a lot of the recent distress, it is now driving a lot of the new opportunities.

"What I mean by that is we see actually lender appetite coming back for retail for the first time in a decade, which is surprising and exciting at the time," Ingersoll said. "We see on the other side of the table, no credit available for office, (there) is still a decent interest in apartments, logistics, self-storage, single family for rent, but because there haven't been a lot of payoffs on that credit side, the availability isn't as strong."

"I'm really excited about this unfreezing of the market capital. You know, the readers of your magazine (are) feeling like we're troughing on values. We have a little bit of clarity in where interest rates may at least go. We have maybe some valuations that sellers are willing to capitulate finally to get the market to be liquid again."

CBRE Investment Management has $150 billion in worldwide assets under management, about $33 billion of which is the Americas segment that Ingersoll oversees.