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Welcome to Soundbites, weekly insights on market trends and investment strategies, brought to you by Investment Executive and powered by Canada Life. For today’s Soundbites, we’re talking about real estate with Rich Hill, head of real estate strategy and research with Cohen & Steers. We talked about where he sees opportunities and economic headwinds. And we started by asking him to put the real estate market into perspective.

Rich Hill (RH): Let me start by saying that we’re very big believers that listed REITs lead in downturns and recoveries. And so we think the listed REIT market bottomed in late October of 2023. And we actually do think the best opportunities in the real-estate market are in the listed REIT market right now, as we see positive returns across economic scenarios over the next 12 months or so. I’d be remiss if I didn’t mention the private markets, though. We think private markets are down around 20% peak to current. And we think they’ll be down around 25% to 30% at their trough in late 2024 to early 2025. We think this is setting up for a generational opportunity to invest in private real estate. There are some opportunities at tomorrow’s valuations that are beginning to emerge for investors that can be patient and selective.

How listed REITs been performed this year

RH: I won’t belabour the point: listed REITs are down 6% or so year to date. So it hasn’t really been a great start to 2024. They’re the only sector of the S&P 500 that’s actually down. But we’re up in the high teens — almost 20% — from the trough in October 2023. November was one of the best months ever. December was still a top-25 month. But the market maybe got a little bit ahead of itself. It basically just gave back some of its returns from late 2023. And again, I point back to they’re still up 10% year over year, and we’re up almost 20% from the trough in late 2023.

Assessing the various real estate sectors

RH: Oftentimes we think about commercial real estate and REITs as a singular asset class. But in reality, there are 18 different sub sectors that can sometimes act very differently. Look, everyone likes to talk about office. Office is struggling right now, both because we overbuilt office over the past two to three decades, but also because of work-from-home dynamics. So office valuations, particularly in gateway, coastal markets, are under pressure. But new clean and green office properties are seeing significant demand. What’s really struggling is Class B, and C office. So that’s properties that were built in the 1970s, 1980s that have not had reinvestment put into them. They’re struggling. Multifamily? I think multifamily is probably one of the most interesting asset classes. Over the near term, it actually is facing some real headwinds. But the long-term fundamentals for the apartment sector actually look really, really good. Industrial? Industrials in the listed REIT market are the worst performing sub sector year to-date, almost down around 20% or so. But there’s still a tremendous amount of demand on the private side for industrial. And so it really comes back down to what do you think your long-term growth expectations are? Most private investors would say it’s still really, really strong. The listed market’s telling you it’s probably not going to be as strong as the private market thinks. The final point I would make to you is what’s happening in retail. Retail is very under owned by institutional investors. But fundamentals are strong, because no one’s built a new property over the past 10 to 15 years. So we think it’s probably one of the few asset classes that you can buy right now and make some pretty attractive returns on.

Where he sees opportunities

RH: The commercial real estate market has actually grown to include things like data centers and cell towers and seniors housing, and single-family rental. These next-generation property types are almost 60% of the listed REIT market at this point. They’ve actually become a really big part of the listed REIT market. And I think private real estate investors are just now beginning to recognize that there’s a big broad spectrum of commercial real estate out there away from the four main food groups. There are some pretty interesting commercial real estate opportunities that are beginning to emerge. Everyone thinks about commercial real estate as sort of an old-economy asset class, but in reality, it’s not. It’s become the new economy. And there are different types of real estate that you can focus on.

And finally, what’s the bottom line on real estate in the current moment?

RH: I think we can all agree that the sentiment around commercial real estate is not great right now. But this is the very best environment to actually generate returns. We don’t think anything’s wrong with the commercial real estate market. We think it’s a healthy market. We actually think the sell-off is very explainable. This is an incredible opportunity to invest new dry capital on tomorrow’s valuations. The very best vintage returns come in the aftermath of environments like today.

Well, those are today’s Soundbites, brought to you by Investment Executive and powered by Canada Life. Our thanks again to Rich Hill of Cohen & Steers. Visit us at, where you can sign up for our a.m. newsletter and never miss another Soundbite. Thanks for listening.


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