For commercial real estate market participants seeking guidance on navigating through challenges and discovering opportunities, it’s always instructive to glean insights from veteran institutional investors. That’s what Transwestern will be providing with its 15th Annual Transwestern Capital Markets Symposium on Wednesday, June 15 in Chicago. 

Moderating the discussion will be Steve Pumper, executive managing partner of Transwestern’s Capital Markets and Asset Strategies Group. Confirmed speakers include Tuba Malinowski of Stockbridge Capital Group, Craig Tagen of Clarion Partners, Tim Ellsworth of DWS, Gio Cordoves of KBS, Paul Ketterer of AEW Capital Management and Jim Halliwell of Principal Real Estate Investors. 

Connect CRE will provide post-event coverage of the symposium. To provide a sample of the insights that the conversation will yield, we sounded out the panelists for their observations on current market conditions. Previously, we featured insights from Tuba Malinowski; here are responses from Craig Tagen, head of portfolio management—separate accounts at Clarion Partners. 

Q: Do you anticipate being a net buyer or a net seller this year, and has this outlook changed over the past six months? 

A: The outlook is changing all the time. The past 60 to 90 days have made it very interesting. But we have not changed our conviction that we will be a net buyer of real estate in 2022. There is still an abundance of capital looking at real estate, our base case predicts a soft landing for the economy, and there are a few sectors that are still exhibiting really strong fundamentals. Because of that, we’ll continue to be a net buyer. 

Q: Nationally, we’re heading into midterm elections at a time when the country’s political divide has rarely been greater. Is the uncertainty of the outcome affecting either buyer or seller decision-making? 

A: For the midterm elections, not necessarily. One of the biggest concerns in the real estate market, and for the economy, is inflation right now, which is at a 40-year high. As most people vote with their wallets, we believe high inflation has the potential to strongly influence the election. The Republicans may take the House and the Senate, but regardless, we’ll continue to see gridlock in Washington, DC. And with gridlock in Washington, things will be pretty much same-state going forward.

So, we don’t see any major changes. No one’s talking about Build Back Better at the present time because they’re concerned with high inflation. We think we’re likely to see a real estate market that isn’t influenced by the midterm elections. 

Q: Has your outlook on particular property types changed this year, to the extent that they appear to be higher-risk or lower-risk compared to a year ago? 

A: Biotech has been one of the leading sectors over the past three years. But given the current state of the economy, venture capital funding may be taking a pause, and because of that, there may be a slowdown in this sector. We still see the potential for strong rent growth in both industrial and multifamily, where vacancy right now remains low compared to the long-term averages and believe there will continue to be capital looking at both of those sectors.  

We’ve been watching closely the retail sector, and specifically community retail, which seems to be improving. Retail centers are benefiting from employees working remotely and supporting their local retail communities. We continue to watch retail because for the first time in a while, we expect to see more stores opening than closing this year. Office remains a big question mark as tenants try to figure out how they’re going to utilize their existing space and whether they need to reconfigure into more or less space. We believe the office sector recovery is going to be even slower than anticipated as office users of all sizes struggle to find the optimal balance between “work from home” and “return to the office.” 

Q: Are you focusing on investment in the U.S. or seeing more opportunities in other parts of the world? 

A: Clarion is an investor in pan-European industrial properties, and we expect attractive opportunities will continue to present in that sector. However, in certain markets the risk of investing makes the U.S. more attractive, and with that dynamic you have capital looking to invest in the U.S., Canada and Mexico rather than Russia or China, for example. And right now, the U.S dollar is about on par with Europe, making the U.S. relatively attractive.