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Think U.S. Commercial real estate debt: A 'superfood' that can enhance portfolio performance

Melissa Reagen
Managing Director, Head of Research, Americas
DC Intersection

We consider commercial real estate (CRE) debt to be a portfolio ‘superfood’, given its track record of consistently generating attractive risk-adjusted returns, relative to most other asset classes, although past performance is not a reliable guide to future performance.1 Prior to the Global Financial Crisis (GFC), banks, life insurers, and CMBS investors held nearly 80% of the $4.1 trillion2 U.S. commercial and multifamily mortgage investment market, making it difficult for other investors to access. Stricter banking regulations, enacted in the wake of the GFC, resulted in a pullback in commercial banks’ and CMBS conduits’ lending activities, and according to Preqin, opened up the door for an $19.5 billion capital raise for U.S. CRE debt in 2017.

1See Fig.6 highlighting where CRE debt outperformed stocks and bonds on a risk-adjusted basis, from 1997-2017. 2Federal Reserve Flow of Funds, Q4 2017.

Issued by Nuveen Real Estate Management Limited, 201 Bishopsgate, EC2M 3BN. Authorised and regulated by the Financial Conduct Authority. Nuveen Real Estate is a name under which Nuveen Real Estate Management Limited provides investment products and services. Nuveen Real Estate is a real estate investment management holding company owned by Teachers Insurance and Annuity Association of America (TIAA). Nuveen Real Estate securities products distributed in North America are advised by UK regulated subsidiaries or Nuveen Alternatives Advisors LLC a registered investment advisor and wholly owned subsidiary of TIAA, and distributed by Nuveen Securities, LLC, member FINRA.