Skip to main content
Login to access your documents and resources.
Confirm your location
location select
language select
Weekly Commentary

Commercial real estate not vacant of opportunity

Saira Malik
Chief Investment Officer
Equities Investment Council member Saira Malik

Bottom line up top:

Sturdiness in the new-home market, however, has come at the expense of a rickety existing-homes counterpart.
CIO weekly commentary chart 2

Portfolio considerations


Under the microscope, not under the bus. This spring’s banking sector turmoil has investors casting a wary eye on commercial mortgage-backed securities (CMBS). A dose of caution is understandable given the risks associated with commercial real estate debt on regional bank balance sheets. But while CMBS faces headwinds from slowing economic activity — and, more acutely, challenges in the office property sector — assessing the relative value of specific securities is best achieved through focused scrutiny rather than sweeping generalizations.

We also see opportunities in floating-rate CMBS within more defensive property sectors like industrial and multi-family.

In our view, many investment grade tranches of fixed-rate deals maturing in the next one to three years look attractive. History shows that CMBS issued at least three years before the 2008-09 global financial crisis experienced much smaller losses than those issued just prior to its onset. Although there are no guarantees, this pattern may repeat itself during the likely upcoming recession. One reason for this: CMBS has benefited from both substantial property value appreciation over the past 10 years (Figure 2) and gradual amortization of outstanding debt. Debt issued earlier in an economic expansion tends to be relatively safer than debt issued near the end of a market cycle.

CIO weekly commentary chart 2

We also see opportunities in floating-rate CMBS within property sectors we deem more defensive, such as industrial and multi family. Floating-rate debt can offer attractive yields, and property revenues in those two sectors in particular have benefited from inflation. Additionally, fundamentals across the industrial sector are healthy, with vacancy rates below their long-term pre-pandemic averages in 49 of the top 50 U.S. cities. Among specific industrial property types, e-commerce related real estate should continue to perform well, as online shopping growth boosts demand for warehouse and distribution space to fulfill orders. As for multi family, rising home ownership costs mean that renting versus buying is very attractive. And more than a decade of underbuilding has created a cumulative deficit of several million homes, equivalent to about three years of new housing production.

As for the office sector, we see pockets of value. We’re not optimistic on the sector overall, but we are finding opportunities in select deals that have repriced materially lower, largely due to market sentiment. We favor the highest-quality (class A+) properties that are able to retain and attract tenants paying top-of-market lease rates. Yields for investment grade office bonds are in the low-double digits — far higher than for other property types.

Although we’re not optimistic on the office sector overall, it offers pockets of value.

Nuveen’s Global Investment Committee (GIC) brings together the most senior investors from across our platform of core and specialist capabilities, including all public and private markets.

Regular meetings of the GIC lead to published outlooks that offer:

Related articles
Investment Outlook CIO commentary archive
Access previous issues of Saira Malik’s weekly CIO commentary on strategy and portfolio construction.
Weekly Commentary Hawkish Fed rhetoric boosts Treasury yields
U.S. Treasury yields rose after hawkish comments from U.S. Federal Reserve officials.
Investment outlook The Fed hikes once more
The U.S. Federal Reserve hiked rates once again at today’s policy meeting, as expected.
Contact us
Our offices
London skyline
201 Bishopsgate, London, United Kingdom



All market and economic data from Bloomberg, FactSet and Morningstar.

This material is not intended to be a recommendation or investment advice, does not constitute a solicitation to buy, sell or hold a security or an investment strategy, and is not provided in a fiduciary capacity. The information provided does not take into account the specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made based on an investor’s objectives and circumstances and in consultation with his or her financial professionals.

The views and opinions expressed are for informational and educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions, legal and regulatory developments, additional risks and uncertainties and may not come to pass. This material may contain “forward-looking” information that is not purely historical in nature.

Such information may include, among other things, projections, forecasts, estimates of market returns, and proposed or expected portfolio composition. Any changes to assumptions that may have been made in preparing this material could have a material impact on the information presented herein by way of example. Past performance does not predict or guarantee future results. Investing involves risk; principal loss is possible.

All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such. For term definitions and index descriptions, please access the glossary on Please note, it is not possible to invest directly in an index.

Important information on risk

All investments carry a certain degree of risk and there is no assurance that an investment will provide positive performance over any period of time. Equity investing involves risk. Investments are also subject to political, currency and regulatory risks. These risks may be magnified in emerging markets. Diversification is a technique to help reduce risk. There is no guarantee that diversification will protect against a loss of income. Investing in municipal bonds involves risks such as interest rate risk, credit risk and market risk, including the possible loss of principal. The value of the portfolio will fluctuate based on the value of the underlying securities. There are special risks associated with investments in high yield bonds, hedging activities and the potential use of leverage. Portfolios that include lower rated municipal bonds, commonly referred to as “high yield” or “junk” bonds, which are considered to be speculative, the credit and investment risk is heightened for the portfolio. Credit ratings are subject to change. AAA, AA, A, and BBB are investment grade ratings; BB, B, CCC/CC/C and D are below-investment grade ratings. As an asset class, real assets are less developed, more illiquid, and less transparent compared to traditional asset classes. Investments will be subject to risks generally associated with the ownership of real estate-related assets and foreign investing, including changes in economic conditions, currency values, environmental risks, the cost of and ability to obtain insurance, and risks related to leasing of properties. Investors should be aware that alternative investments including private equity and private debt are speculative, subject to substantial risks including the risks associated with limited liquidity, the use of leverage, short sales and concentrated investments and may involve complex tax structures and investment strategies. Alternative investments may be illiquid, there may be no liquid secondary market or ready purchasers for such securities, they may not be required to provide periodic pricing or valuation information to investors, there may be delays in distributing tax information to investors, they are not subject to the same regulatory requirements as other types of pooled investment vehicles, and they may be subject to high fees and expenses, which will reduce profits. Alternative investments are not appropriate for all investors and should not constitute an entire investment program. Investors may lose all or substantially all of the capital invested. The historical returns achieved by alternative asset vehicles is not a prediction of future performance or a guarantee of future results, and there can be no assurance that comparable returns will be achieved by any strategy.

Nuveen provides investment advisory services through its investment specialists.

This information does not constitute investment research as defined under MiFID.

Back to Top