November 25, 2015
Real estate: The impact of rising interest rates
Martha Peyton, Ph.D., Managing Director, and Edward F. Pierzak, Ph.D., Managing Director, TIAA-CREF Global Real Estate Strategy and Research
- The prospect of rising interest rates raises concerns about the potential impact on U.S. commercial real estate property values and investment performance.
- Real estate investors fear that rising interest rates will cause property values to fall and total returns to weaken.
- Historical data show that higher interest rates have not necessarily derailed real estate total return performance. In fact, property performance has often remained resilient in the face of rising rates.
- Furthermore, there are a number of factors that may provide protection to overall property performance in a rising interest rate environment.
October 21, 2015
Shopping for Suburban Office Investments
Martha Peyton. Ph.D., Managing Director; Thomas Park, Senior Director
Suburban office markets have been the slowest property sector to recover since the Great Financial Crisis, however suburban markets still account for the majority of U.S office space. Transactional activity is picking up as well, with suburban office sales volume up 40% year-to-date in 2015 compared with 2014. While TIAA’s appetite for suburban office product remains limited and highly focused, in this paper we discuss the reason for the recent growth of suburban office investment.
September 16, 2015
Shopping for Retail Property Investments: The art of the science
Martha Peyton. Ph.D., Managing Director; Thomas Park, Senior Director
This paper outlines TIAA-CREF’s approach to selecting retail property investments, focusing on the characteristics of the center and the characteristics of the trade area in combination with the competitiveness of the property rather than on format industry definitions.
September 11, 2015
Defensive Investing in US Commercial Real Estate
Martha Peyton. Ph.D., Managing Director; Edward F. Pierzak, Ph.D. Managing Director
What is defensive commercial real estate investing?
Defensive commercial real estate investing involves tactical efforts to target property types,
markets and property characteristics that are expected to outperform benchmarks during
August 25, 2015
A Fine Year? Examining Vintage-Year Real Estate Performance
Martha Peyton. Ph.D., Managing Director; Edward F. Pierzak, Ph.D.
This paper explores vintage-year real estate performance by examining portfolios of newly-acquired NPI properties over 20 years. Our results show that, just as in the wine industry, “great” real estate investment vintage years benefit from ideal, but uncommon conditions. Skillful portfolio managers can compensate in the same manner as skillful vintners, by “blending” to create a satisfying result.
July 2, 2015
Investing in education
Martha Peyton, Ph.D. and Ed Pierzak, Ph.D. discuss the student housing sector and why this may be an attractive investment opportunity for institutional investors.
May 28, 2015
Sustainable Real Estate Investing: Exploring the Burden of Proof
Martha Peyton, Ph.D., Managing Director; Edward F. Pierzak, Ph.D., Managing Director; Nicholas E. Stolatis, Senior Director; TIAA-CREF Global Real Estate Strategy & Research
- Despite potential financial benefits for tenants and landlords, as well as environmental benefits, pursuing sustainable or "green," real estate within an investment strategy is often met with investor skepticism.
- The qualitative case for sustainable real estate investing is fairly straightforward and can be built through a review of economic returns, environmental returns, risk mitigation, and market expectations. A recently published comprehensive review of existing literature tends to provide positive economic support for sustainable property initiatives.
- Sustainability data from the National Council of Real Estate Investment Fiduciaries can provide additional insight into the total return performance characteristics of green properties. Despite potential shortcomings, our positive to neutral results for green office portfolios can be viewed as consistent with other empirical findings that favor sustainable real estate investing.
- Real-life experiences also support the investment case. During 2014, TIAA-CREF’s Global Real Estate Sustainability Initiative has benefitted our portfolios by avoiding over 118 million kilowatt-hours of energy consumption, reducing greenhouse gas emissions by over 47,700 metric tons of carbon dioxide equivalent, and saving more than $14 million in energy costs.
- Combining the individual pieces of the "mosaic," i.e., qualitative arguments, existing academic and practitioner research, and real-life experiences, investors will likely realize the limited drawbacks and promising upside to sustainable real estate investing.
March 24, 2015
U.S. Commercial Real Estate Outlook: The Return of Volatility
What does 2015 have in store for U.S. commercial real estate (CRE)? In this paper, we review the past five consecutive calendar years of double-digit performance and return drivers, and examine the factors that CRE investors should consider when looking ahead to 2015. We conclude that prospects are bright, and that volatility is an important factor for investor to monitor as they assess their CRE portfolios in 2015.
January 13, 2015
Creative Construction: A general shift in the U.S. industrial sector
The U.S. industrial sector is undergoing a generational shift as demand is growing for new bulk warehouses which have the design features required by the nation’s largest retailers, manufacturers, third party logistics providers, and e-commerce companies. Required design features which enable companies to achieve operational efficiencies and cost savings include larger facilities, higher building clear heights, energy efficient building systems, gated yards and secure trailer parking. The shifting needs of warehouse users points to better investment prospects for contemporary warehouse stock and has important implications for investment strategy.
December 22, 2014
2014 Global Real Estate Strategy and Research Compendium
Explore the Global Real Estate Strategy and Research Compendium, for the teams 2014 perspectives and insights of real estate investing.
October 28, 2014
REITs and Real Estate: Complementary through good times and bad
In this paper, we re-affirm that REITs and real estate function in a complementary fashion in investment portfolios. Using data through mid-2014, our analysis shows that investor portfolios that contain both REITs and real estate can enjoy higher return, higher risk-adjusted return, and lower volatility than portfolios comprised of a traditional 60% stock/40% bond mix.
September 22, 2014
Counting Cranes: Supply Discipline & Apartment Market Performance
Solid performance, strong capital flows, and expanding debt availability have created an environment that is ripe for new construction and apartment developers have aptly responded. Although forecasters expect the new supply to be well-digested, investors still worry about its impact on investment performance. Recognizing the materiality of new multifamily supply, this paper explores apartment market “supply discipline” and its relationship with total return performance. The results clearly show that supply discipline, as well as absolute rent growth, matter for investors seeking total return outperformance in apartment markets.
July 31, 2014
Awaiting the Cranes: Supply Discipline and Office Market Performance
What is a “supply-disciplined” market? Is there a connection between supply discipline and total return performance? This report examines this relationship within the US office markets and concludes that the best investment performance is composed of a combination of strong demand growth and measured new construction.
March 14, 2014
How is a generational shift impacting investment performance in the office sector? Where are the opportunities for investors?
This paper examines the forces associated with the demographic shift known as Gen Y and the drive toward “creative space” in office design, which is intended to appeal to the tastes of young “millennials.” Authors Martha Peyton, PhD, and Edward F. Pierzak, PhD, advise real estate investors to consider:
- Restructuring portfolios away from office properties that are in locations that do not appeal to millennials.
- Adding investments in office properties that can benefit from the generational shift.
- Embracing leasing opportunities that transform space through creative design and use that space to demonstrate expertise to prospective tenants.
January 9, 2014
It's all relative: Assessing global real estate investment opportunities
With the continued globalization of financial markets, more investors are seeking to construct global property portfolios. But, what is the best way to assess relative value across countries? In this new white paper, It’s all relative: Assessing global real estate investment opportunities, Martha Peyton, Edward F Pierzak and Timothy Francis of TIAA-CREF's Global Real Estate Strategy & Research team describe an analytic process that uses available data to identify countries with relatively equivalent country risk and abundant liquidity in order to help investors evaluate global real estate opportunities.
January 6, 2014
Private real assets: Improving portfolio diversification with potentially uncorrelated market exposure.
Private investments in real assets – farmland, timberland, and commercial real estate – offer the potential to enhance returns and diversify risk in institutional portfolios. Real assets have exhibited higher returns and lower volatility than stocks and bonds, with low or negative correlations. Historical analysis using index returns for the 21-year period, 1992-2012, showed:
September 26, 2013
Taking the high road: Do higher-yielding property markets pay?
Have major property markets become too expensive? Is it time to pursue higher-yielding markets? Read the latest white paper from TIAA-CREF's Global Real Estate Strategy & Research team to learn why they believe that chasing yield does not guarantee superior total returns.
June 28, 2013
Riding the cycle: The ups and downs of real estate investing
The course of real estate investing features ups and downs, with certain markets and sectors performing better during varying parts of the cycle. But just like the Tour de France bicycle race, it's performance across the long-term that really matters. In this paper our experts explore this concept, examining the cycle so far and patterns of recovery across primary and secondary markets, performance of certain property markets during distinct phases of the cycle, and offer their assessment of current trends and strategy for winning the real estate investment race.