Private real estate and the impact of tariffs: Stay measured

Sharp shifts in US tariff policies have caused disruption to capital markets. Here’s our perspective, which focuses primarily on our US portfolio.

1. Stay measured. Don’t swing hard in either direction until there’s more clarity.
   Invesco Real Estate is taking a measured approach to tariff-induced market volatility. While continuous trading in the public markets can drive hyper-responsiveness, we believe private markets have the benefit of digesting information more deliberately, without emotional spikes.
2. Growth concerns call for a review of existing and new investments.
   We believe that risks around economic growth and inflation have increased. At a minimum, uncertainty will cloud decision-making for some tenants in the near term. This shift in conditions warrants a review of risk/reward within portfolios and new investment opportunities. 
3. Transaction volume could decline as investors, notably foreign capital, move to the sidelines and debt availability becomes more selective.
   It’s too early to know if volumes will diminish materially this year because of tariffs. There’s a positive correlation between transaction volume and asset price growth. Thus, reduced activity could dampen appreciation, all else being equal.
4. It’s not all negative, but sentiment and growth are the dominating factors right now.
   The increased risk environment could lead to lower interest rates and further reductions of new supply. We acknowledge these positives, but, at present, we’re more focused on demand, credit quality of tenants, and capital flows.
5. Historically, periods of lower liquidity have presented attractive investment windows.
   We know from experience that attractive entry points emerge during periods of disruption and volatility when there is less competition. As investors digest tariff implications, we’ll be looking for those opportunities.
6. Real estate credit remains attractive.
   Private credit provides structural protections that can be attractive if the impact of tariffs lead to weaker economic conditions. And private credit returns have exceeded equity returns over recent years of elevated interest rates. We think an allocation to credit alongside real estate equity may be prudent for absolute and risk-adjusted performance.

Important information

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All investing involves risk, including the risk of loss.

This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions.

Diversification does not guarantee a profit or eliminate the risk of loss.

Investments in real estate-related instruments may be affected by economic, legal, or environmental factors that affect property values, rents or occupancies of real estate. Real estate companies, including REITs or similar structures, tend to be small and mid-cap companies and their shares may be more volatile and less liquid.

The views and opinions expressed are subject to change based on factors such as market and economic conditions. The opinions may differ from those of other investment professionals.

The opinions referenced above are those of the author as of March 25, 2025. These comments should not be construed as recommendations, but as an illustration of broader themes. Forward-looking statements are not guarantees of future results. They involve risks, uncertainties and assumptions; there can be no assurance that actual results will not differ materially from expectations.