Positioning for the opportunity in real estate credit

Invesco Real Estate was recently named Real Asset Manager of the Year by Insurance Asset Risk’s 2025 North Americas Awards. ¹ Following the win, Charlie Rose, Head of Global Credit at Invesco Real Estate, sat down with Insurance Asset Risk to discuss the current opportunity in real estate credit and how the firm is helping insurers capitalize. 

Q: First of all, congratulations on winning the ‘Real Asset Manager of the Year’ award. What do you think set you apart this year?

Charlie: We talk about the Invesco edge as our point of differentiation in the market. That starts with our 40+ year track record of investing in commercial real estate and our approach to the business, which is characterized by two pillars.

The first is a ‘Property First’ discipline. Invesco has long been a major global investor in real estate equity, so we only lend on the type of real estate that we are buying for our equity strategies. We have a collaborative process between our equity and credit teams to ensure that a ‘Property First’ discipline is maintained at every step of the investment process.

The second pillar is ‘Credit Over Yield’, which has served us well across $23 billion of loans originated over the last 10 years. We define outperformance for our strategies by hitting our target expected returns and outperforming on credit quality—higher credit metrics, better quality sponsors, better quality real estate, and so on.²

Through this approach, we have become one of the most active alternative lenders in the commercial real estate space. The Mortgage Bankers Association recognized us as the fourth most active alternative lender in the US last year³ and that is a direct result of our proprietary origination channels. Today, roughly 75% of our new loans are originated to multi-repeat borrowers, typically on a preferentially sourced or off-market basis. Our borrowers come to us time and time again because of the trust we’ve developed, and because of our efficient, reliable execution.

Q: I understand that ‘IQ Compounding’ is another unique aspect of your approach. Can you explain what that means in practice?

Charlie: We are a $2tn+ investment manager,⁴ and our real estate business is one of the fifteen largest globally.⁵ But it’s not size that we think sets us apart. It’s how we use our platform to seek better outcomes for clients. Our culture is defined by what we call ‘IQ Compounding’—that is both within our 600-employee real estate organization⁶ and across Invesco.

Throughout the investment process, our team draws on the expertise of others, whether that be equity investment professionals, capital market professionals, legal professionals. As a case in point, when we take a new loan to our credit committee, the dedicated credit team presents the case for the transaction, but we also bring in professionals from other areas of the organization for their perspectives. If there isn’t broad support, the loan doesn’t move forward.

Q: Shifting to the broader market, what is your outlook for commercial real estate lending?

Charlie: The real estate industry in both the US and Europe has gone through a recession that started in 2022 and persisted into 2023. During that time, real estate values in the US fell by 22% peak to trough.⁷ Since then, we've seen a very slow recovery, but values have come off their bottoms, and fundamentals, overall, are strong across the industry.

At the same time, commercial banks—the historically dominant players within real estate credit markets—have pulled back.⁸ So, we have been benefiting from a very attractive entry point, characterized by reset property values and reduced competition. We've seen volumes increase steadily across the last two years, and with expectations of additional rate cuts going forward, we're anticipating higher real estate transaction volumes over the next 12 months.

Q: You touched on rate cuts going forward. How are you thinking about their potential impact on real estate credit?

Charlie: We believe that real estate credit is a strategic asset class that belongs in diversified portfolios throughout every stage of the cycle. It’s the fourth largest fixed income asset class in the US, representing $6 trillion.⁹ Add to that the European market, at about $2 trillion,¹⁰ and we see an $8 trillion addressable market.

Historically, the asset class has been characterized by modest risk, with lower annualized standard deviation compared to direct lending or private real estate equity.¹¹ It also offers low correlations to both traditional and alternative assets, making it a valuable diversifier—especially as we navigate interest rate uncertainty.¹²

At Invesco, we seek to perform throughout any stage of the interest rate cycle. To help insulate from rate volatility, we structure interest rate floors into all of our loans. As a rate-agnostic investor, we also require our borrowers to purchase interest rate caps. This helps us prepare for both high and low interest rate environments.

Beyond interest rate volatility, we know that we are operating in a world where there are black swan events, which is why we are fundamentally focused on risk mitigation. We lend at very defensive positions in the capital stack and to the most qualified borrowers in the industry. We specifically tend to focus on loans in the 60-70% loan-to-value range, meaning our borrowers are investing 30-40% subordinate equity beneath our loan. That is by design. If you look at the most significant drawdown in modern real estate history—the global financial crisis—values dropped 32% from peak to trough before starting to recover.¹³ So, our approach is designed to be resilient, even in these types of macroeconomic events.

Q: We’ve covered a lot of ground today. Any parting thoughts?

Charlie: We are seeing increased investor interest in real estate credit. It is a large asset class which is asset backed and has just weathered a major recession. As banks reduce their market share, this is creating significant opportunities for alternative lenders. At the same time, the asset class’s current income profile, historically limited volatility, and diversification benefits are attracting attention from insurance companies, other institutional investors, and even retail investors. Looking ahead, we believe that managers with deep expertise, unique origination channels, and the proprietary processes and data needed to underwrite and structure opportunities will be best positioned to optimize return potential in the space.