Private real estate and the impact of tariffs: Stay measured

Sharp shifts in US tariff policies have caused disruption to capital markets. We’ve produced this opinion primarily with US market conditions in mind, but we acknowledge this is a global situation, extending well beyond the scope of this memo.

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 still looks attractive.
   Private credit provides structural protections that can be attractive if the impact of tariffs lead to weaker economic conditions.