Commercial Real Estate Recovery: Where the Opportunities Are | Rich Hill, Principal

Commercial real estate has moved from downturn to recovery, but the gains are uneven. Rich Hill of Principal Asset Management joins Michael Bull, CCIM to map where the opportunities are.

Rich Hill is Senior Managing Director and Global Head of Real Estate Research and Strategy at Principal Asset Management, which manages roughly $110 billion of commercial real estate globally. He explains why US total returns have risen for about 8 consecutive quarters, why real estate cycles average around 16 years, and why net operating income growth will drive returns in a cycle with little room left for cap rate compression.

Beneath muted headline returns, the top quartile of properties is performing well while the bottom quartile has failed to launch. Rich walks through the US housing mismatch and a selective view on Class A apartments, build-to-rent under the ROAD to Housing Act, senior housing demand from the growing 70+ population, and why power centers and unanchored retail look attractive. On office, 90% of vacancy sits in 30% of buildings and 40% of buildings have no vacancy at all.

With the 10-year Treasury above 5%, Rich and Michael discuss why properties trading below replacement cost are holding back new supply, and why commercial real estate worked for decades with Treasury rates at 4% to 5%.

In this episode:
00:00  Where Are the Commercial Real Estate Opportunities?
01:32  CRE Recovery: 8 Quarters of Rising Returns and 16-Year Cycles
03:48  Muted Headline Returns and the Dispersion Underneath
06:28  Selective Conviction and the US Housing Mismatch
08:35  Class A Apartments, Class B Value-Add, and AI Job Risk
09:55  Build-to-Rent and the ROAD to Housing Act
10:59  Senior Housing: The Growing 70+ Population
12:01  Retail Real Estate: Power Centers and Unanchored Centers
14:13  AI, White-Collar Jobs, and the Office Market
16:40  Below Replacement Cost: Why New Supply Has Stalled
18:37  Investing With a 5% 10-Year Treasury
19:46  Back to Normal: CRE at 4% to 5% Treasury Rates

Connect with Rich Hill:
https://www.linkedin.com/in/richard-hill-2156387/
Principal Asset Management Website: https://www.principalam.com

Connect with Michael Bull & The Show:
Michael Bull, CCIM
Bull Realty, Inc
https://www.linkedin.com/in/michaelbull/

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