Conditions remain healthy for real estate investment, with inflation expected to be transitory and any increase in long-term interest rates likely to be modest, according to Carly Tripp, global chief investment officer and head of Nuveen Real Estate Investments.
Speaking on the REIT Report, Tripp said that although inflation had been felt in terms of cost fluctuations for building materials, Nuveen’s view is that inflation is transitory. “Overall, we’re not concerned at this point and continue to see a recovery across the board with some of these supply/demand imbalances expected to rectify over the next two or three quarters.”
Tripp noted that interest rates remain “extremely attractive,” despite expectations of rate rises for the past decade. While the Federal Reserve has indicated it has no plans to increase short term rates anytime soon, long term rates, which are dependent on the market, are not posing a problem either, she added.
“We don’t expect an environment where there is a sharp increase in long-term rates for a sustained amount of time. We would expect increases to be more modest, with a slower, gradual progression over time, based on the current environment—which is really healthy and is also manageable as a commercial real estate investor,” Tripp said.
Elsewhere in the podcast, Tripp highlighted the importance of portfolio diversification. “Having a diversified approach over the long term will make any real estate investor better-equipped to deal with any short term changes to the business cycle.”
Tripp also said the market now has better insight into real estate valuations, indicating that M&A activity should remain strong. “Deal volume did triple in the U.S. in the second quarter and we don’t anticipate there to be any slowing in pace throughout the remainder of the year.”
Meanwhile, Tripp said the healthy environment for housing and industrial assets should continue. She also noted that retail real estate remains a relevant sector, with 78% of online orders involving a physical store, whether through same-day store pick-up or goods being shipped from the store. “The physical store and connectivity to consumers is still critical, and overall the death of retail as a headline lacks a lot of detail and context around the sector,” Tripp added.