US Real Estate Summary

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Private commercial real estate continues to produce steady returns, in line with long-term expectations, even though there are some differences across major property types, exhibit 1. Long-horizon real estate investors expected returns to slow in line with historical performance. After all, rent growth is positive. The economy is growing. Expectations are for continued economic growth, even if the rate of growth is less robust than mid-2018. 

However, during late-2018 and early-2019, investors experienced heightened uncertainty and volatility in equity and bond markets. After four short-term rate hikes in 2018, the US Federal Reserve indicated the December 2018 rate hike would likely be followed by a pause. Boosts to sentiment were shortlived as a partial government shutdown lasted more than a month, delaying the release of critical data points, like 4Q18 GDP. Budget negotiations and debt ceiling debates remain points of continued discontent.