Nuveen believes that real estate is an integral asset for multi-asset portfolios especially during periods of volatility and the recent tight correlation between stocks and bonds. Within real estate, the firm favors private real estate due to attractive yields, diversification, and uncorrelated returns.
According to the firm, private real estate outperforms during bear markets because prices are based on real transactions rather than public markets. This dampens volatility especially during periods of market stress when public equities can go haywire.
In terms of both public and private real estate, Nuveen favors the industrial sector due to expectations of continued growth in e-commerce and investments in logistics near urban locations. Another factor supporting growth is supply chain diversification which is boosting demand for space near ports on the East Coast and the US/Mexico border.
It’s also constructive on healthcare, residential, and self-storage. Within the public REIT space, the gaming sector is in favor due to high dividends and strong cash flows. Another tailwind has been consolidation in the space which is leading to upward pressure on rents.
Nuveen also believes that we are in the final innings of the Fed’s hiking cycle due to inflation moderating which could be a major catalyst for the sector going into next year.
Finsum: Nuveen is bullish on real estate particularly for the industrial, healthcare, and residential sectors. Also, it believes that we are close to the end of the Fed’s hiking cycle.