CRE Returns: Back to Fundamentals
Commercial real estate is entering a new era. For nearly four decades, investors could rely on cap-rate compression and cheap capital to drive returns. Today, with the 10-year Treasury in the 4% range, leverage may no longer subsidize performance. The focus must shift to property-level fundamentals: active asset management, disciplined capex and smart leasing choices.
MSCI’s Jim Costello explains how sector allocation — once the dominant driver of outperformance — is giving way to property selection. Those who outperform the MSCI Quarterly Property Index today are picking the right assets and managing them well. Even in the hottest sector — data centers — due diligence on asset age, location, cooling systems and equipment quality is essential to avoid obsolescence risk.
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