14 Mar 2024
15 min read

Real Estate Pulse - Q1 2024

Office Buildings

Download the full article

pdf - 2.09 MB

Read our newsletter

Standing on Solid Ground

Fourth quarter property performance capped a year of pervasive pressure in response to the interest rate tightening that began in early 2022. Commercial real estate investment performance remained positive through most of 2022 as it typically lags macro-economic developments. The first crack occurred in the fourth quarter of 2022 with a negative 3.5% total return. The fourth quarter of 2023 produced the fifth consecutive negative quarter bringing 2023 full year total return to a negative 7.9%.

Additional highlights

  • US commercial property investment total return performance was negative through all four quarters of 2023.
  • Higher interest rates stressed property values and constrained refinancing property debt and financing property purchases.
  • Expectations for an improvement in the pace of transactions are grounded in the gap between recent transactions reported by Real Capital Analytics and the property index calculated by Green Street.
  • Excess supply of apartments and industrial space in some metros stressed rent growth; office remains unsettled.
  • But, surprisingly strong economic growth in 2023 sustained NOI growth for all four property type sectors.
  • Positive economic growth and interest rate cuts in 2024 are positive for CRE but further value decline is possible. 

Download the full article

Read our thoughts and reflections with regards to the real estate market by downloading our latest newsletter. 

Additional insights

Cash Money Bars

Cash Balance Plans

Portfolio Solutions - LDI

Because cash balance plans with yield-based crediting rates operate differently than traditional plans, it is vitally important for investment strategy, contribution strategy and actuarial assumption setting to operate in a coordinated fashion to meet plan sponsor goals.

Share prices graphic

Rethinking Overlay Manager Diversification

Portfolio Solutions - LDI

At LGIM America, we believe overlay manager diversification is likely inefficient and creates uncompensated risks. Using multiple overlay managers can result in increased costs, collateral inefficiency and higher governance burdens.

Views and opinions expressed herein are as of the date published and may change based on market and other conditions. The material contained here is confidential and intended for the person to whom it has been delivered and may not be reproduced or distributed. The material is for informational purposes only and is not intended as a solicitation to buy or sell any securities or other financial instrument or to provide any investment advice or service. Legal & General Investment Management America, Inc. does not guarantee the timeliness, sequence, accuracy or completeness of information included. Past performance should not be taken as an indication or guarantee of future performance and no representation, express or implied, is made regarding future performance.

Unless otherwise stated, references herein to "LGIM", "we" and "us" are meant to capture the global conglomerate that includes Legal & General Investment Management Ltd. (a U.K. FCA authorized adviser), LGIM International Limited (a U.S. SEC registered investment adviser and U.K. FCA authorized adviser), Legal & General Investment Management America, Inc. (a U.S. SEC registered investment adviser) and Legal & General Investment Management Asia Limited (a Hong Kong SFC registered adviser). The LGIM Stewardship Team acts on behalf of all such locally authorized entities. © 2024 Legal & General Investment Management Limited. All rights reserved. No part of this publication may be re-produced or transmitted in any form or by any means, including photocopying and recording, without the written permission of the publishers.