With extensive knowledge of real estate investment and experience producing relevant analytics for different audiences, Edward Pierzak joined Nareit as senior vice president of research in August 2022. In his role, he produces CRE and macroeconomic analysis, while also strengthening relationships with public, private, and academic organizations. Pierzak brings more than 20 years of real estate and finance industry experience to Nareit, most recently serving as the director of The Corky McMillin Center for Real Estate at San Diego State University. He sat down with REIT.com to discuss his background and what he looks forward to bringing to Nareit.
How has your previous career background shaped you for this role?
While I am relatively new to Nareit, I am not new to real estate. I have an extensive background in the institutional real estate investment management business where I had portfolio management, strategy and research, and client-facing roles. My work took me across the U.S., and around the world, to visit projects and meet with investors.
More recently, I spent some time in academia, teaching and mentoring undergraduate and graduate students with an interest in finance and real estate. I believe that my professional experiences have given me a unique perspective to contribute to Nareit's commercial real estate and macroeconomic analyses.
Is there an aspect of REITs that you think is misunderstood?
I think that investors often view public and private real estate investment as an “either-or” decision, but that does not have to be the case. Each of real estate’s four quadrants (private equity, public equity, private debt, and public debt) can play important roles in investor portfolios.
As REITs have become leaders in owning and operating real estate that supports the modern economy, they can prove to be a wonderful complement to existing private equity real estate portfolios. At the end of 2000, new and emerging sectors (infrastructure, data centers, health care, self-storage, and timberlands) accounted for less than 10% of total equity REIT market capitalization; they now account for nearly 40% of the industry’s market cap. Today, infrastructure (cell towers) is the largest sector, and the data center market cap is greater than that of office.
Looking ahead for 2023, how do you see current market conditions shaping the landscape for REITs?
The U.S. economy has been facing numerous headwinds, and the confluence of these factors has resulted in increased economic uncertainty. The most recent Bloomberg consensus forecast survey placed the odds of a U.S. recession within the next 12 months at 65%.
At the same time, the U.S. commercial real estate market has been in the midst of an uncoupling. Property operational performance has generally been strong, but total return and valuation metrics between public and private real estate have diverged. This divergence has increased the attractiveness of public equity REITs, providing investors with both tactical and strategic investment opportunities.
What are some areas of research you expect to be focusing on this year?
Economic, financial, and commercial real estate market happenings typically influence Nareit’s research agenda. With that in mind, I am certain that we will continue to focus on the developments related to the divergence of public and private real estate total returns and capitalization rates.
In addition, I plan to do more work on REIT completion portfolios. These portfolios use REITs to complement, or “complete,” an aspect of a real estate portfolio. They can help investors achieve their targeted real estate exposures and/or investment objectives by accessing broader property sector and geographic diversification, enhancing environmental, social, and governance (ESG) profiles, and improving overall portfolio performance.