Leaving PIMCO.com

You are now leaving the PIMCO website.

Skip to Main Content
Economic and Market Commentary

Capitalizing on Change in the Real Estate Market

Discover potential opportunities in the real estate market from a panel discussion at our recent Alternatives Investor Conference.

Text on screen: PIMCO

Text on screen: PIMCO provides services only to qualified institutions and investors. This is not an offer to any person in any jurisdiction where unlawful or unauthorized

Text on screen: What is the current state of the commercial real estate market?

Images on screen: John Murray, Seray Incoglu and François Trausch presenting at the alts conference

John Murray: The real estate market is clearly the most dislocated we've seen since the global financial crisis. I'd say what differentiates it, at least today, is, in our view, more of a capital markets dislocation versus a fundamentals dislocation.

Text on screen: John Murray, Head, Global Private Commercial Real Estate

Fundamentals are generally okay, some pockets of bubbles, supply bubbles today, but generally okay. It's really the fact that we had a 500 basis point expansion in rates, which has led to volatility, which essentially has crushed liquidity across all four quadrants of commercial real estate. And that's public and private debt and public and private equity.

Text on screen: What are the implications on the public and private sides of the market?

Images on screen: John Murray, Seray Incoglu and François Trausch presenting at the alts conference

John Murray: Let's start with public equities or REITs. REITs are down anywhere from 20 to 80 percent in the case of office in the U.S. So instead of being a buyer to the tune of $50 billion plus a year, they're on the sidelines in many cases looking for liquidity themselves. Then when we think about the public debt markets, i.e., the CMBS markets, clearly there the volatility in the fixed-income markets has crushed that business. In a volatile market, it doesn't make sense from a business perspective to be a CMBS lender. So that part of the market is gone in terms of providing liquidity in the sector.

In thinking about the private side, the banks clearly front and center in terms of pressures there. I think the fundamental point there is that bank balance sheets are bloated to the extent of 30 percent-plus over the last five years. What that means, again, is that instead of being liquidity providers today, in many cases they're looking for liquidity themselves. Throw on top of that regulatory pressures. Throw on top of that, in some cases, headline pressures. They as well, again, are now looking for liquidity versus providing it and looking to reduce their exposure.

Text on screen: Where are the opportunities?

Images on screen: John Murray, Seray Incoglu and François Trausch presenting at the alts conference

Text on screen: Seray Incoglu, Portfolio Manager, CRE Liability Management

Seray Incoglu: There are several in the credit space that range from sort of lower yielding to higher yielding. I think we're specifically seeing an immediate surge in transitional lending. So transitional loans are those loans where you're transitioning, as the name calls it, an asset, whether it’s you know the project is in lease up or there's some sort of renovation, or you're doing a TCO, a takeout where the construction just is nearing completion, but you need to lease up the project.

Text on screen: François Trausch, CEO and CIO, PIMCO Prime Real Estate

Francois Trausch: We have now the opportunity to really be very active while the banks are on the sidelines. I think the opportunities for large tickets which banks no longer do they have to syndicate that loan-to-own strategy because we do have professionals who can manage the assets, gives us a lot of flexibility even afterwards when you have to renegotiate some of the covenants. So having that flexible capital to play the capital stack.

Text on screen: What other areas is PIMCO focused on given current market conditions?

mages on screen: John Murray, Seray Incoglu and François Trausch presenting at the alts conference

John Murray: Debt is clearly where we see the best value. With respect to equity, the key word there is patience. We do think it's going to get worse before it gets better and so to the extent we're looking for opportunities there, it generally needs to be a dislocation situation. With respect to the secular, there, again, we're focused on areas that we believe in the secular tailwinds. Francois mentioned residential as a longer term tailwind, also certainly digitalization, i.e., data centers, again, in terms of just the secular demand growth there, we've seen that supercharged of late with AI.

Text on screen: For more insights and information, visit pimco.com

Text on screen: PIMCO

DISCLOSURE


All investments contain risk. Investing in the bond market is subject to certain risks including market, interest-rate, issuer, credit, and inflation risk. Investments in residential/commercial mortgage loans and commercial real estate debt are subject to risks that include prepayment, delinquency, foreclosure, risks of loss, servicing risks and adverse regulatory developments, which risks may be heightened in the case of non-performing loans. Investments in mortgage and asset-backed securities are highly complex instruments that may be sensitive to changes in interest rates and subject to early repayment risk. Structured products such as collateralized debt obligations are also highly complex instruments, typically involving a high degree of risk; use of these instruments may involve derivative instruments that could lose more than the principal amount invested. Equity investments may decline in value due to both real and perceived general market, economic and industry conditions, while debt investments are subject to credit, interest rate and other risks. Diversification does not ensure against loss

References, either general or specific, to securities and/or issuers are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities.

The material contains statements of opinion and belief. Any views expressed herein are those of PIMCO as of the date indicated, are based on information available to PIMCO as of such date, and may not have been updated to reflect real time market developments. Statements of opinion are subject to change, without notice, based on market and other conditions. No representation is made or assurance given that such views are correct. PIMCO has no duty or obligation to update the information contained herein.

This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

PIMCO as a general matter provides services to qualified institutions, financial intermediaries and institutional investors. Individual investors should contact their own financial professional to determine the most appropriate investment options for their financial situation. This is not an offer to any person in any jurisdiction where unlawful or unauthorized. | Pacific Investment Management Company LLC, 650 Newport Center Drive, Newport Beach, CA 92660 is regulated by the United States Securities and Exchange Commission. | PIMCO Europe Ltd (Company No. 2604517, 11 Baker Street, London W1U 3AH, United Kingdom) is authorised and regulated by the Financial Conduct Authority (FCA) (12 Endeavour Square, London E20 1JN) in the UK. The services provided by PIMCO Europe Ltd are not available to retail investors, who should not rely on this communication but contact their financial adviser. | PIMCO Europe GmbH (Company No. 192083, Seidlstr. 24-24a, 80335 Munich, Germany), PIMCO Europe GmbH Italian Branch (Company No. 10005170963, Corso Vittorio Emanuele II, 37/Piano 5, 20122 Milano, Italy), PIMCO Europe GmbH Irish Branch (Company No. 909462, 57B Harcourt Street Dublin D02 F721, Ireland), PIMCO Europe GmbH UK Branch (Company No. FC037712, 11 Baker Street, London W1U 3AH, UK), PIMCO Europe GmbH Spanish Branch (N.I.F. W2765338E, Paseo de la Castellana 43, Oficina 05-111, 28046 Madrid, Spain) and PIMCO Europe GmbH French Branch (Company No. 918745621 R.C.S. Paris, 50–52 Boulevard Haussmann, 75009 Paris, France) are authorised and regulated by the German Federal Financial Supervisory Authority (BaFin) (Marie- Curie-Str. 24-28, 60439 Frankfurt am Main) in Germany in accordance with Section 15 of the German Securities Institutions Act (WpIG). The Italian Branch, Irish Branch, UK Branch, Spanish Branch and French Branch are additionally supervised by: (1) Italian Branch: the Commissione Nazionale per le Società e la Borsa (CONSOB) (Giovanni Battista Martini, 3 - 00198 Rome) in accordance with Article 27 of the Italian Consolidated Financial Act; (2) Irish Branch: the Central Bank of Ireland (New Wapping Street, North Wall Quay, Dublin 1 D01 F7X3) in accordance with Regulation 43 of the European Union (Markets in Financial Instruments) Regulations 2017, as amended; (3) UK Branch: the Financial Conduct Authority (FCA) (12 Endeavour Square, London E20 1JN); (4) Spanish Branch: the Comisión Nacional del Mercado de Valores (CNMV) (Edison, 4, 28006 Madrid) in accordance with obligations stipulated in articles 168 and 203 to 224, as well as obligations contained in Tile V, Section I of the Law on the Securities Market (LSM) and in articles 111, 114 and 117 of Royal Decree 217/2008, respectively and (5) French Branch: ACPR/Banque de France (4 Place de Budapest, CS 92459, 75436 Paris Cedex 09) in accordance with Art. 35 of Directive 2014/65/EU on markets in financial instruments and under the surveillance of ACPR and AMF. The services provided by PIMCO Europe GmbH are available only to professional clients as defined in Section 67 para. 2 German Securities Trading Act (WpHG). They are not available to individual investors, who should not rely on this communication. | PIMCO (Schweiz) GmbH (registered in Switzerland, Company No. CH-020.4.038.582-2, Brandschenkestrasse 41 Zurich 8002, Switzerland). The services provided by PIMCO (Schweiz) GmbH are not available to retail investors, who should not rely on this communication but contact their financial adviser. | PIMCO Asia Pte Ltd (8 Marina View, #30-01, Asia Square Tower 1, Singapore 018960, Registration No. 199804652K) is regulated by the Monetary Authority of Singapore as a holder of a capital markets services licence and an exempt financial adviser. The asset management services and investment products are not available to persons where provision of such services and products is unauthorised. | PIMCO Asia Limited (Suite 2201, 22nd Floor, Two International Finance Centre, No. 8 Finance Street, Central, Hong Kong) is licensed by the Securities and Futures Commission for Types 1, 4 and 9 regulated activities under the Securities and Futures Ordinance. PIMCO Asia Limited is registered as a cross-border discretionary investment manager with the Financial Supervisory Commission of Korea (Registration No. 08-02-307). The asset management services and investment products are not available to persons where provision of such services and products is unauthorised. | PIMCO Investment Management (Shanghai) Limited. Office address: Suite 7204, Shanghai Tower, 479 Lujiazui Ring Road, Pudong, Shanghai 200120, China (Unified social credit code: 91310115MA1K41MU72) is registered with Asset Management Association of China as Private Fund Manager (Registration No. P1071502, Type: Other). | PIMCO Australia Pty Ltd ABN 54 084 280 508, AFSL 246862. This publication has been prepared without taking into account the objectives, financial situation or needs of investors. Before making an investment decision, investors should obtain professional advice and consider whether the information contained herein is appropriate having regard to their objectives, financial situation and needs. To the extent it involves Pacific Investment Management Co LLC (PIMCO LLC) providing financial services to wholesale clients, PIMCO LLC is exempt from the requirement to hold an Australian financial services licence in respect of financial services provided to wholesale clients in Australia. PIMCO LLC is regulated by the Securities and Exchange Commission under US laws, which differ from Australian laws. | PIMCO Japan Ltd, Financial Instruments Business Registration Number is Director of Kanto Local Finance Bureau (Financial Instruments Firm) No. 382. PIMCO Japan Ltd is a member of Japan Investment Advisers Association, The Investment Trusts Association, Japan and Type II Financial Instruments Firms Association. All investments contain risk. There is no guarantee that the principal amount of the investment will be preserved, or that a certain return will be realized; the investment could suffer a loss. All profits and losses incur to the investor. The amounts, maximum amounts and calculation methodologies of each type of fee and expense and their total amounts will vary depending on the investment strategy, the status of investment performance, period of management and outstanding balance of assets and thus such fees and expenses cannot be set forth herein. | PIMCO Taiwan Limited is an independently operated and managed company. The reference number of business license of the company approved by the competent authority is (112) Jin Guan Tou Gu Xin Zi No. 015 . The registered address of the company is 40F., No.68, Sec. 5, Zhongxiao East Rd., Xinyi District, Taipei City 110, Taiwan (R.O.C.), and the telephone number is +886 2 8729-5500. | PIMCO Canada Corp. (199 Bay Street, Suite 2050, Commerce Court Station, P.O. Box 363, Toronto, ON, M5L 1G2) services and products may only be available in certain provinces or territories of Canada and only through dealers authorized for that purpose. | No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission. PIMCO is a trademark of Allianz Asset Management of America LLC in the United States and throughout the world. ©2023, PIMCO.

CMR2023-1013-3169915

Discover potential opportunities in the real estate market from a panel discussion at our recent Alternatives Investor Conference.

Navigating Uncertainty with Alternative Investments

Unlocking the Power of Alternative Investments

Adapting to the Evolving Credit Landscape

Decoding Quant Strategies

Featured Participants

Tell us a little about you to help us personalize the site to your needs.

Terms and Conditions

Please read and acknowledge the following terms and conditions:
{{!-- Populated by JSON --}}
Select Your Location

Americas

Asia Pacific

Europe, Middle East & Africa

Back to top