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A Game Plan for Today's Real Estate Markets

A defense’s mantra: protect against the big play. In portfolio diversification, that means guarding against downside risk. Real estate is an asset class that may insulate portfolios against traditional market risks. Yet, in today’s environment, you need an even stronger defense led by true real estate markets.

Build a Blueprint to Get Past Market Roadblocks

For illustrative purposes only.

What You Are Up Against

The real estate cycle has matured, yet attractive opportunities still exist. When devising your strategy, it is important to recognize which headwinds to avoid and how to adjust.

Opposing Forces

Rising Interest Rates

RISING RATES MAY IMPACT REAL ESTATE PROPERTY VALUES1

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The 10-year Treasury has climbed 69 basis points since the beginning of 2018.

Slowing Rent Growth

RENT GROWTH IS MODERATING FROM PREVIOUS YEARS2

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Rent growth over the last year was significantly lower than the previous two years.

More Construction

NEW SUPPLY PIPELINE IS GROWING (MILLIONS)3

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U.S. square feet under construction is up over 70 million from five years ago.

SLG's Manhattan Office Cash Leasing Spreads

J.P. Morgan. 10/17/18.

Big Supply Concerns in the Big Apple

Core markets are a good barometer of the state of play in real estate markets. Manhattan alone has 29.2 million square feet of office real estate in its supply pipeline.

Despite a growing economy, Manhattan leasing spreads are falling. Why? Oversupply.

Washington, D.C. Projected New Construction

Cushman & Wakefield. 9/30/18.

Construction is Climbing in the Nation's Capital

After a period of little supply, available and leased new construction is projected to climb in Washington, D.C.

Asking rents are already dropping … and could fall further with increased new supply coming online.

Take the Right Risks

Defensively positioning your real estate strategy does not eliminate equity investment opportunities. Rather than relying on organic rent growth, however, look to value-add and non-core strategies executed by strong management teams.

Potential play: consider the evolution of the student housing market.

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Resource Growth Lines

Performance as Rates Rise

Bloomberg. FTSE NAREIT All Equity REITs Index (Equity REITs). Mortgage REITs represents an equity market cap-weighted basket of publicly traded mortgage REITs, including Apollo Commercial Real Estate, Ares Commercial Real Estate, Blackstone Mortgage Trust, Granite Point Mortgage Trust, Ladder Capital, and TPG Real Estate Finance Trust. 1/1/18-8/31/18.

Look to Credit Opportunities

Historically, property values declined as rates rose.

Potential play: Focus on credit investments like commercial mortgage REITs. They sit higher in the capital structure and may offer a better risk premium than equity investments in this late-cycle environment.

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Resource is the marketing name for Resource Real Estate, LLC, Resource Alternative Advisor, LLC, and their affiliates. Resource may distribute certain products through Resource Securities LLC, a wholly owned broker/dealer, Member FINRA/SIPC

All statements and information other than statements of historical fact included on this website regarding strategy, future operations, financial position, estimated revenues, projected costs, prospects, plans and objectives of management are forward-looking statements. When used on this website, the words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. You should not place undue influence on these forward-looking statements. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make on this website are reasonable, we can give no assurance that these plans, intentions or expectations will be achieved because of the number of risks and uncertainties, many of which are beyond our control, including but not limited to uncertainties concerning the properties being operated and sold or refinanced, leverage and meeting debt service obligations, operating properties in different locations throughout the U.S., general, market or business conditions and changes in laws or regulations. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf. To check the background of Resource Securities LLC or any registered individual, please go to FINRA’s BrokerCheck.