Real estate Emerging opportunities in real estate credit

Rethink Portfolios: Commercial real estate with Charlie Rose

In this episode of Rethink Portfolios, Danielle Singer sits down with Charlie Rose, Invesco’s global head of commercial real estate credit, to look past the headlines and unpack what’s really happening in commercial real estate. From the office market narrative to the evolving opportunity in real estate credit, they explore where risks remain, where demand is holding up, and why select areas of the market may be more resilient than many investors think. (Invesco Distributors, Inc.)

Danielle Singer:

Hello, I'm Danielle Singer, head of wealth management platforms for Invesco, and I'm excited to bring you the second episode of Rethink Portfolios. A new series from the Greater Possibilities podcast. This show will go inside the decision-making process of portfolio managers, where we'll bring you in-depth conversations that explore how our experts manage risks, identify opportunities, and navigate changing markets.

Now speaking of markets, our market focused show with Brian Levitt and Jodi Phillips will continue as usual right alongside the series.       So please watch your podcast queue for the latest from them.

Now with that, let's get to our guest. Charlie Rose is the global head of commercial real estate credit for Invesco. I'm very excited to have this conversation with Charlie today, because of all the headlines about this space that are probably still raising concerns. Some even say it's broken. But while office demand remains lower than it was pre-pandemic, there are likely market specific nuances that are going to be critical to understand. So let's welcome Charlie to give us his insights on what he's concerned about, what he's not concerned about, and why it's time to rethink real estate. Welcome to the podcast, Charlie.

Charlie Rose:    

Danielle, thank you so much for having me here. It's such an honor to talk to you again. I'm really looking forward to the conversation.

Danielle Singer:

Great. Now we're going to spend some time drilling down into the credit part of real estate, but we're going to start big picture. Because when most people hear commercial real estate lately, they picture half empty office buildings, scary headlines. So from your perspective, on a scale of dumpster fire to quietly fine, where are we really?

Charlie Rose:                   

Well, that's a great setup, Danielle. I would say if people are going to use terms like dumpster fire, they must be looking at a very small portion of the commercial real estate industry. And probably what they're looking at is the office sector where we've seen so many negative headlines over the last couple of years, but let's put that into context. Office is only 2.5% of the listed US commercial real estate market. Now it's a little bit larger in the unlisted institutional market, but it's still only 17% of that segment of the market. So said differently, 96% of listed investment real estate is something other than office, and 83% of unlisted institutional investment is not office. Even within office too, you see a broad divergence in performance. And I think many people are shocked to hear that in the office sector, fully 47% of all office buildings in the United States today are fully occupied, meaning they're 95% occupied or higher. So roughly half of the office market is fully occupied. So we have to take down some of the rhetoric and really look at the numbers to understand what's going well and what's not going well in the commercial real estate industry.

To be clear, commercial real estate did go through the second largest correction in modern history between 2022 and 2023. We saw real estate values in the institutional space down somewhere 20 to 25% during that period of time. This time around was different, however. It wasn't a demand or supply driven issue specifically. It was a rate shock that led to that adjustment in pricing. And we've now seen real estate values start to increase from the bottom, we've seen supply drop off fairly significantly. And overall in the commercial real estate industry, we're seeing an environment of stability from a demand perspective and from a valuations perspective.

Danielle Singer:

That's really helpful context and I think that data speaks to maybe, like you said, what's driving some of those headlines versus the reality. So let's keep on this theme of is the pain over. I think one time when we were speaking recently, you did talk about that real estate values have been recovering maybe even since late 2023. Now, if you and I were at a cocktail party that might get some mixed reception. What do you think has been driving that recovery?

Charlie Rose:                   

So again, commercial real estate saw a major correction starting at the end of 2022 as rates started to rise. We look at two metrics when we're thinking about real estate values. The first, and we have to make a clear distinction, is prices. What are market clearing prices as individual investors are buying and selling real estate? And the second are values. What values are being recognized in existing portfolios through an appraisal process?

So from the pricing perspective, prices have actually started to increase as early as late 2023. So we're now almost three years into a recovery cycle, and prices as measured by the Green Street Price Index are up 8.8% from the trough in late 2023.

Now from a valuations perspective, valuations typically take longer to adjust down and longer to start to correct. So valuations in the NCREIF index are up only marginally from the trough at about 0.3%, with that increase really just starting to come in over the last year.                                 

But regardless, today we're in an environment where both transaction prices are increasing and valuations broadly writ are increasing across the market. That has resulted in less of a gap between buyers and sellers, more certainty for lenders in the market as to the values of the collateral they're lending against. And for us, that's translating into a significant increase in both our buying activity in the real estate market and even more so in our lending activity in the commercial real estate market.

Danielle Singer:

Wow, that certainly makes it sound like things have been exciting and continue to get more exciting. So maybe touching on a stat you brought up before, office being a relatively small part, 95 plus percent outside of office. So would you say this is not a narrow recovery but rather broad across property types and markets?

Charlie Rose:                   

Yes, and it is broad, but real estate remains a sticks and bricks asset class, block by block, asset by asset. And so there's a lot of nuance that we see across the industry. To start with, we are now seeing demand firm up in our asset classes where we spend most of our time from a credit perspective being apartments and industrial. Apartments and industrial are the largest transaction markets today and are characterized by a fairly stable demand profile and cashflow profile, driven by the fact that these buildings are occupied by many tenants and that results in less volatility in the underlying cash flows. Demand is increasing in those asset classes right as we're seeing supply start to drop off, but different markets are reacting differently.

And I'll give multifamily as a specific example, somewhat counter to popular opinion is where we're seeing the strongest apartment rent growth throughout the country. Many people would assume that you're seeing the strongest rent growth in the Sunbelt markets, those markets that are seeing the largest population and employment growth. But in fact, over the last two years, the three best performing apartment markets from a rent growth perspective have been New York City, Chicago, and San Francisco. And these are markets that are characterized by very low supply and relatively stable demand, which has resulted in better rent growth.

Danielle Singer:

So you have access to a lot of data. You're quoting a lot of things that you see as a subject matter expert, but a lot of our listeners don't. So when they say commercial real estate is broken, what do you think they're getting wrong? Is it just the headlines or is there something else you think that they might be observing that's feeding this? Just to put a bow on this topic.

Charlie Rose:                   

Yeah. So I think that is somewhat of a backward-looking statement over a relatively short period of time. From a forward-looking perspective, we are seeing an environment in which you have relatively stable demand, you have reduced supply, and you have a stabilization of values. I also think that you may be somewhat informed by the way that investors have accessed commercial real estate historically, that is leading us to be focused on the equity side of our business in investing in a very data-driven, differentiated fashion, and to emphasize to a much higher degree some of the specialty product types that we think will perform particularly well in this environment. These are generally asset classes that are characterized by modest CapEx and relatively high current in place income, and include amongst other things, senior housing, manufactured housing, medical office and student housing.

Now, the credit side of the business is another area where we are spending a lot of time focusing, and real estate credit stands out as particularly attractive because it's exhibited effectively a zero correlation over the last 10 years to real estate equity. As an aside, real estate credit similarly has effectively had zero correlation to private credit over the last 10 years. So that is a way of accessing real estate that has a very low correlation, a current income level that historically has been attractive relative to both private credit and equity, in our opinion, and is set up to perform well in a higher for longer rate environment.

Danielle Singer:

Charlie, you brought up a lot of great points there, one of which very helpful, is the distinction between investing in real estate from the equity perspective or the credit perspective where you are more focused on. So let's spend some time getting into the nuts and bolts maybe of the credit investing side of this space. One thing I think that a lot of people think about is banks as the traditional dominant lender, and now it has switched to alternative lenders, private credit, for example. What changed that really drove a lot of this?

Charlie Rose:             

Sure. So if you go back prior to the global financial crisis, banks in the United States were over 60% of the commercial real estate debt market. Fast-forward to 2019, banks were a little bit over half of the commercial real estate debt market. Last year in 2025, banks only represented 34% of new commercial real estate loans being originated.

So you've seen this progression from 60% to 50% to around a third of the market being represented by bank lenders. And to put that into perspective, we're talking about what is today a $6 trillion asset class. So that is a very substantial reduction in overall origination volume from the banks.

And there have been multiple factors and multiple steps along the way that have resulted in the banks being less active. To be clear, the banks still remain very active in commercial real estate debt. They're still a third of a very large market, but from a relative perspective, they're less active, because banks have realized that there are other more efficient ways from a capital treatment perspective for them to deploy their capital.

And one area where we've seen the banks get particularly aggressive in the growth of their businesses is providing loan-on-loan leverage to alternative real estate lenders such as ourselves. So they're getting access to the asset class without making direct real estate loans secured by real estate.

Danielle Singer:

And maybe it's that the traditional lenders, at least today, aren't the ones dominating some of the news. Right? There's been a lot of headlines recently around private credit, and it was great that we were able to have Scott Baskind, who heads up our global private credit team on our Rethink Markets podcast recently, to talk about the sector and what's happening. You already started to touch on some of the diversification properties of private real estate credit, but do you want to dive into a little bit more about how it stands out potentially within a portfolio from other forms of private credit?

Charlie Rose:                   

Sure. So what exactly is real estate private credit? Maybe we'll start there. Real estate private credit as we think about it is a strategy in which we are direct originators of mortgages secured by commercial real estate properties. In most instances today, we are making a mortgage loan just as an individual would obtain a mortgage loan against a home. We're the lender making that mortgage loan against an apartment building, an industrial building, or similar property types. We're doing so at scale and we're generally lending to institutional sponsors. So rather than a family being the borrower on a mortgage loan on a single family loan, we are lending to a multi-billion dollar institutional fund run by a manager whose name would be familiar to you.

We're generally doing so on a relatively short-term basis, three to five-year total loan term, with a floating interest rate structure. This asset class is characterized by, again, as I mentioned, a very low correlation to private credit and to real estate equity, and it's characterized historically over the last 10 years, by lower volatility than, say, real estate equity.

So while you don't have the growth potential that you would get in real estate equity, in real estate credit, you do have a very stable current income profile and a diversifying benefit coming from these portfolios of mortgage loans. The reason you've seen less volatility in real estate credit is by virtue of the position in the capital stack that we're investing in. On average, historically, we've been a lender around 65% loaned value, which means if we are lending against a $100 million property, we're making a $65 million loan, and subordinate to us is $35 million of equity from a brand name institutional sponsor. So even in a GFC-like or 2022 like market correction, our loan balance is insulated.

Danielle Singer:

I appreciate that you were able to zoom out a bit and redefine the space for our listeners. So now let's zoom in a little bit more. Earlier you touched on a few areas that you were finding attractive, but let's talk about where you're really leaning in right now. When you look across your landscape, what's standing out as particularly appealing or interesting today?

Charlie Rose:                   

So first, when we're talking about real estate credit, our objective is to be a pretty boring part of your portfolio. Number one, my job is to not lose money, and I want to minimize default rates, minimize delinquencies, minimize volatility. So our focus is really on risk mitigation.

Today we have found ourselves continuing to be very active in making loans to industrial buildings, and specifically when we're talking about industrial buildings, we're really focused on multi-tenant infill industrial buildings that have a diversification of the cash flows that are used to pay the interest on our mortgages, and secondly, on various forms of housing, most notably apartments. From a geographic perspective, we always strive to have a geographically diversified portfolio, but year-to-date, Europe has stood out as a particularly attractive market for us. So we have been leaning in to institutionally backed real estate in Europe, while also remaining cognizant that the US market is about three times the size of the European market. That's always going to be our largest market.

Danielle Singer:

I love that you are talking about trying to be boring in that sleep well at night type of asset class. And maybe that's somewhat at odds with things like the enthusiasm around AI, and I think you've been pretty clear about maybe steering away from things like data centers. Is that why? Is there an element of risk and not boring that's keeping you on the sidelines in that space?

Charlie Rose:                   

 I am at risk of scaring folks away during this very exciting period of innovation, but as we think about the real estate lending business,at a time in which investors have quite substantial exposure to AI in different parts of their portfolios, we have made the conscious decision to avoid data centers and focus on non-AI correlated property types.

Additionally, I would say as a sleep well at night conservative lender, that whenever I see a lot of enthusiasm in a specific segment of the market, it makes me nervous and I start to retrench back towards the most stable cash flows without binary risk. Most data centers have some sort of binary risk in terms of single asset exposure or potential exposure to redundancy over time. And accordingly, that's why we've been very vocal, we're not making loans on data centers today, we don't plan to, and we intend to keep it that way.

Danielle Singer:

Very interesting. And I like the ability to contextualize it for the AI story and then the specific commercial real estate credit story elements of AI enthusiasm. One area that I think our listeners might be enthusiastic about just because it's tangible. I love that parts of real estate, it's about you can see it, you can touch it, many of us are homeowners. And it sounds like retail and hotels, areas familiar to a lot of people, are starting to pick up steam. What's changing that's making those sectors interesting right now?

Charlie Rose:                   

Yeah, so let's break it down a little bit. Retail would probably surprise a lot of our listeners as being our strongest conviction amongst the four major traditional asset classes, at least from an equity perspective. So traditionally within institutional real estate, the four prominent sectors have been retail, apartments, industrial, and office building. Retail was out of favor for a long time with overbuilding and the onset of e-commerce, as well as changing consumer preferences. Today we are finding ourselves in an environment where we have much better understanding of e-commerce penetration and what types of retail are thriving in an e-commerce environment. And we also are finding ourselves in an environment where we simply haven't been building new retail for well over a decade, at the same time as our population in the US has been increasing. So from a supply-demand perspective, retail is leading us to be very convicted in that space. Now, interestingly, that is mostly an equity conviction for us right now. On the credit side, retail is a little bit harder to access for the types of retail that we like. And so we see less volume in retail on the credit side.

Hotels are a very different asset class and are an asset class where you've seen that K-shaped recovery really accentuate a certain profile of winner and a certain profile of loser. So you are seeing some notable strength, particularly at the high end of the market, but for us, we are playing it very conservatively because it is a very operational business, it is a CapEx intensive asset class, and you have to release the building every single night, which creates more volatility in the underlying cash flows than you would see in some of those other property types that we focus on.

Danielle Singer:

Thanks for clarifying that. And it's nice to hear that for some of us that are mall walkers, there's still maybe a tailwind at least on the retail equity side of the space.

Charlie Rose:    

Don't air all your dirty secrets to our podcast listeners, Danielle.

Danielle Singer:

Maybe that's what's going to keep the listeners. Let's take it personal for a minute. What do you love most about your job investing in commercial real estate credit markets?

Charlie Rose:    

You know, Danielle, I love talking to young people in our industry. It's one thing that gives me a lot of joy. And as I'm talking to young people getting into our industry, I often tell them, careers are a combination of luck and hard, hard work. And also, many careers are characterized by being willing to take advantage of opportunities, even if they weren't what you planned for when they arise. So when I got into this business, I thought I was going to be a real estate developer, building shiny skyscrapers that I could show my children I had built and feel very proud of.

Today I'm a real estate lender, it is about as different as you can get within our industry from being a developer of skyscrapers. Certainly a much lower risk proposition. But I love talking to our clients, understanding what [inaudible 00:26:56] objectives are, and working with our people to achieve our clients' objectives on a day in and day out basis. This ultimately is a people business, our capability is defined by our people, and we are working on behalf of our investors who are individual constituents with individual goals, and that gives me a lot of satisfaction.

Danielle Singer:

I love that. And hopefully you're inspiring the next gen of Charlie Roses for the commercial real estate credit space. Maybe to wrap up, in five years from now or so, what do you think people will say they misunderstood most about this period in real estate?

Charlie Rose:                   

I think that we often find it is very hard to call the bottom, it is very hard to move with conviction early during a recovery. And I am seeing a setup for a very strong secular cycle in commercial real estate, both credit and equity. We are in an environment of reduced supply, we're in an inflationary environment, it is becoming more and more expensive to build, and it is expensive to finance the ground-up construction of real estate today. Those factors are resulting in less building, at the same time as our economy still grows and our population still grows, and the need for real estate expands. That is setting us up very well from the equity side of the business. On the credit side of the business, we've seen a fundamental shift in the composition of lenders, resulting in greater opportunity for alternative lenders to step in, take market share. And what we find, is once a borrower borrows from an alternative lender, they typically come back time and time again, because it is a smooth, seamless, efficient process. So five years from now, I think folks will look back and say we should have acted with more conviction getting into the real estate space in 2026, at a time when equity was set up for a strong growth cycle and credit was set up for a strong deployment cycle, at a time when that elevated inflation environment was supporting higher for longer pace rates, supporting higher income on floating rate credit instruments.

Danielle Singer:

Amazing, and I'm sure I will have you back well within the next five years. Charlie, as always, it's been an absolute pleasure.

Charlie Rose:    

Danielle, the pleasure was mine.

Danielle Singer:

Thank you, and catch you all next time.

Important information

You've been listening to Invesco's Greater Possibilities podcast, Rethink Markets.

The opinions expressed are those of the speakers, are based on current market conditions as of May 12, 2026, and are subject to change without notice. These opinions may differ from those of other Invesco investment professionals.

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. Should this content contain any forward looking statements, understand that they 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.

All investing involves risk, including the risk of loss.

Past performance does not guarantee future results.

Investments cannot be made directly in an index.

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.

Private credit strategies invest in debt instruments that are not publicly quoted on an exchange.

Private equity strategies invest in companies that are not publicly quoted on a stock exchange.

Alternative investment products may involve a higher degree of risk, may engage in leveraging and other speculative investment practices that may increase the risk of investment loss, can be highly illiquid, may not be required to provide periodic pricing or valuation information to investors, may involve complex tax structures and delays in distributing important tax information, are not subject to the same regulatory requirements as mutual portfolios, often charge higher fees which may offset any trading profits, and in many cases the underlying investments are not transparent and are known only to the investment manager. There is often no secondary market for private equity interests, and none is expected to develop. There may be restrictions on transferring interests in such investments.

In general, stock values fluctuate, sometimes widely, in response to activities specific to the company as well as general market, economic and political conditions.

The risks of investing in securities of foreign issuers can include fluctuations in foreign currencies, political and economic instability, and foreign taxation issues.

There is a risk that the value of the collateral required on investments in senior secured floating rate loans and debt securities may not be sufficient to cover the amount owed, may be found invalid, may be used to pay other outstanding obligations of the borrower or may be difficult to liquidate.

Data on the office sector’s share of the US commercial real estate market based on the FTSE NAREIT All REIT Index as of April 30, 2026.

Data on the office sector’s share of the unlisted institutional market based on the NCREIF Property Index as of March 31, 2026.

Data on office building occupancy rates from CoStar as of the fourth quarter 2025.

Discussion about the 2022-2023 correction in commercial real estate and the increase from the bottom based on the Green Street Commercial Property Price Index. The index fell about 22% from its March 2022 peak to the cyclical low in December 2023, then rose 8.76% from that trough to the most recent reporting period in April 2026.

Data about valuations in the NCREIF Property Index as of the first quarter of 2026, sourced from the National Council of Real Estate Investment Fiduciaries.

Correlation and income comparisons of real estate equity, real estate credit, and private credit over the past 10 years based on the Giliberto-Levy High-Yield Real Estate Debt Index, the Cliffwater Direct Lending Index and the NCREIF Property Index from 2016 through 2025. The 10-year average distribution yield was 11.2% for private real estate credit, 10.3% for direct lending, and 4.5% for private real estate equity. The correlation between the Giliberto-Levy High-Yield Real Estate Debt Index and the Cliffwater Direct Lending Index was 0.06. The correlation between the Giliberto-Levy High-Yield Real Estate Debt Index and the NCREIF Property Index was 0.05.

Statements on the volatility of real estate credit versus real estate equity based on the Giliberto-Levy High-Yield Real Estate Debt Index and the NCREIF Property Index from 2016 through 2025. Based on the annualized standard deviation of 1.37 for the Giliberto-Levy High-Yield Real Estate Debt Index and 3.85 for the NCREIF Property Index. Standard deviation measures an index’s range of total returns in comparison to the mean.

Statistics on the activity of banks in the commercial real estate debt market and the size of the commercial real estate market sourced from the Federal Reserve and MSCI as of April 21, 2026, latest data available.

Discussion of the best performing apartment markets from a rent growth perspective sourced from RealPage market data as of the first-quarter 2026.

Comparisons of the size of the US and European real estate markets sourced from the US Federal Reserve System and Bayes Business School through the fourth quarter of 2025.

The FTSE NAREIT All REIT Index is an unmanaged index considered representative of US REITs.

The NCREIF Property Index, or NCREIF Index,  is a quarterly, unleveraged composite total return for private commercial real estate properties held for investment purposes only.

Green Street Commercial Property Price Index is a value-weighted index that measures what's happening in real estate prices in aggregate. 

The Giliberto-Levy High-Yield Real Estate Debt Index measures the returns of high yield commercial real estate debt.

The Cliffwater Direct Lending Index is an index of private middle market loans. 

Leverage measures a company’s total debt relative to the company’s book value.

Capital expenditures (or capex) is the use of company funds to acquire or upgrade physical assets such as property, industrial buildings, or equipment.

Cash flow is the net amount of cash and cash equivalents generated by a business.

Correlation is the degree to which two investments have historically moved in relation to each other.

Monetary easing refers to the lowering of interest rates and deposit ratios by central banks.

Capital stack is the financial hierarchy of all the money used to fund a real estate investment, including debt and equity.

A K-shaped recovery refers to one in which higher-end categories are thriving and other categories are struggling.

GFC stands for the Global Financial Crisis of 2008.

Rethink Portfolios and the Greater Possibilities Podcast are brought to you by Invesco Distributors, Inc.