Commercial Real Estate - Today

[Call_Me_Op]

I am really seeking opinions on TIAA Real Estate - but in the context of commercial real estate in general. I have always felt that having a modest allocation to TIAA Real Estate made some sense (just as a diversifier). Even with all of the gloom and doom in commercial real estate, one has to believe that the story is priced-in by now. In other words, even if there has been a fundamental shift in the attractiveness of commercial real estate as an asset class, there has been plenty of time for that to be factored into prices. So really my question is the following - is there any reason to approach commercial real estate differently today than one would have pre-pandemic?

[123]

... is there any reason to approach commercial real estate differently today than one would have pre-pandemic?

Due to the pandemic there has been a movement away from commercial retail real estate (malls) and commercial office real estate. The pandemic increased the public's use of shopping over the web and work from home. Commercial real for logistics has boomed but may be becoming overbuilt in some areas.

[Call_Me_Op]

... is there any reason to approach commercial real estate differently today than one would have pre-pandemic?

Due to the pandemic there has been a movement away from commercial retail real estate (malls) and commercial office real estate. The pandemic increased the public's use of shopping over the web and work from home. Commercial real for logistics has boomed but may be becoming overbuilt in some areas.

Sure - but isn't this factored into the prices?

[folkher0]

Tiaa real estate is a nice fund if you pay attention. Extremely low volatility makes it part of the “low risk” part of my portfolio along with TIAA traditional. It was pretty nice in early 2022 when every other asset was tanking

I sold it all when it was clearly starting to trend down. It’s pretty easy to spot the trends in its pricing. When it “crashes” it takes months to go down and rarely goes up or down by more than a small fraction of a percent per day.

So it’s not a buy and hold type of fund. Just sort of a lazy, uncorrelated, easily timeable sort of alternative.

I’m not ready to buy it back again but probably will at some point if I’m seeing the return curve start to trend up again.

There are limitations: if you sell you can’t buy back in till the next quarter. Also now limited to $150,000 for each owner unless you do a direct transfer. We have 2 owners and I wouldn’t put more than 5-10% of our portfolio in it anyway so it still works for us.

[unwitting_gulag]

... is there any reason to approach commercial real estate differently today than one would have pre-pandemic?

Due to the pandemic there has been a movement away from commercial retail real estate (malls) and commercial office real estate. The pandemic increased the public's use of shopping over the web and work from home. Commercial real for logistics has boomed but may be becoming overbuilt in some areas.

Sure - but isn't this factored into the prices?

That is a universal question, faced in any investment-choice beyond a comprehensively agnostic basket-of-funds, is it not? In other words, suppose that the commercial real estate market, or foreign stocks, or oil stocks, or anything else... is beaten down, because of such-and-such news, which presumably are already baked-in into all current prices. OK, then what? If we believe the Efficient Markets Hypothesis, does that militate against any sector concentration? Or do we say, as the OP appears to say, that it's sensible to aim for diversification, including those assets that are currently beaten-down?

[stan1]

... is there any reason to approach commercial real estate differently today than one would have pre-pandemic?

Due to the pandemic there has been a movement away from commercial retail real estate (malls) and commercial office real estate. The pandemic increased the public's use of shopping over the web and work from home. Commercial real for logistics has boomed but may be becoming overbuilt in some areas.

Sure - but isn't this factored into the prices?

In an academic sense, yes it is factored in. In reality, who knows? Equity markets don't actually behave like models. It is still not possible to predict what humans (individually and as members of society) might do and resultant first, second, and third order effects.

[smooth_rough]

I am really seeking opinions on TIAA Real Estate - but in the context of commercial real estate in general. I have always felt that having a modest allocation to TIAA Real Estate made some sense (just as a diversifier). Even with all of the gloom and doom in commercial real estate, one has to believe that the story is priced-in by now. In other words, even if there has been a fundamental shift in the attractiveness of commercial real estate as an asset class, there has been plenty of time for that to be factored into prices. So really my question is the following - is there any reason to approach commercial real estate differently today than one would have pre-pandemic?

You're trying to market time the commercial real estate market by reading news on internet? That's difficult. Because all real estate is local. Some metro markets outperform others. While some types of building categories outperform others.

If you want to invest in REIT, then just dollar cost average it, steady as she goes. Invest same amount monthly for example, ride the market up and ride it back down. Hold it inside tax deferred account, because REITs throw off shit ton of taxable income which can change your tax bracket.

[Valuethinker]

I am really seeking opinions on TIAA Real Estate - but in the context of commercial real estate in general. I have always felt that having a modest allocation to TIAA Real Estate made some sense (just as a diversifier). Even with all of the gloom and doom in commercial real estate, one has to believe that the story is priced-in by now. In other words, even if there has been a fundamental shift in the attractiveness of commercial real estate as an asset class, there has been plenty of time for that to be factored into prices. So really my question is the following - is there any reason to approach commercial real estate differently today than one would have pre-pandemic?

You could compare the decomposition of the TIAA RE fund with comparable listed REITs.

For example if it is 40% office REITs, you could compare it with other large office REITs. Ditto Retail. Etc.

That would give you a feel for what the market says about those particular sub sectors.

I note the quoted REIT index fund has a lot of distribution (Prologis) and Cellular Towers etc. Probably a very different composition than TIAA RE fund.

Is the gloom-and-doom priced in? In private markets, I suspect not fully. Buildings have not been sold yet. So valuations have not fully adjusted downwards. Also there is a looming banking crisis in CRE - non-national banks have a disproportionate share of the loans to Developers ("D&C loans"), also to local housebuilders. Again, the actual move to write-off loans takes time. They have to become Non Performing Loans. And since this can hit bank solvency, neither regulator nor bank management are in a hurry to recognise it.

That would imply those parts of the TIAA RE portfolio might still have downvaluations yet to come. Certainly it's worth comparing the fund's adjustments downward in NAV v that of comparable real estate indices (which are again driven by historic transactions).

[folkher0]

I am really seeking opinions on TIAA Real Estate - but in the context of commercial real estate in general. I have always felt that having a modest allocation to TIAA Real Estate made some sense (just as a diversifier). Even with all of the gloom and doom in commercial real estate, one has to believe that the story is priced-in by now. In other words, even if there has been a fundamental shift in the attractiveness of commercial real estate as an asset class, there has been plenty of time for that to be factored into prices. So really my question is the following - is there any reason to approach commercial real estate differently today than one would have pre-pandemic?

You're trying to market time the commercial real estate market by reading news on internet? That's difficult. Because all real estate is local. Some metro markets outperform others. While some types of building categories outperform others.

If you want to invest in REIT, then just dollar cost average it, steady as she goes. Invest same amount monthly for example, ride the market up and ride it back down. Hold it inside tax deferred account, because REITs throw off shit ton of taxable income which can change your tax bracket.

Tiaa real estate is not really comparable to REITS. REITS are stocks and demonstrate the volatility of stocks. TIAA real estate is directly held commercial real estate, presumably without leverage. Held within retirement accounts at TIAA. Behaves very differently. Apples and oranges really.

[Northern Flicker]

Here is some info on the portfolio held.

https://www.tiaa.org/public/pdf/r/rea_o ... letter.pdf

[livesoft]

TIAA Real Estate (TREA) lags real estate values going down, but also lags them going up. TREA is still slowly going down as of last week. I wouldn't re-enter a position until it has slowly gone up for a couple of months which would still be lagging actual real estate values.

Also follow the threads about TREA market timing:
viewtopic.php?t=377089

With TREA current valuations are NOT factored into the current price. Older valuations are factored into the current price. That is, the current price is ALWAYS stale. Very stale and moldy.

I put the YTD return of TREA in the monthly YTD report in the YTD thread. You can't miss any rebound.

[smooth_rough]

I am really seeking opinions on TIAA Real Estate - but in the context of commercial real estate in general. I have always felt that having a modest allocation to TIAA Real Estate made some sense (just as a diversifier). Even with all of the gloom and doom in commercial real estate, one has to believe that the story is priced-in by now. In other words, even if there has been a fundamental shift in the attractiveness of commercial real estate as an asset class, there has been plenty of time for that to be factored into prices. So really my question is the following - is there any reason to approach commercial real estate differently today than one would have pre-pandemic?

You're trying to market time the commercial real estate market by reading news on internet? That's difficult. Because all real estate is local. Some metro markets outperform others. While some types of building categories outperform others.

If you want to invest in REIT, then just dollar cost average it, steady as she goes. Invest same amount monthly for example, ride the market up and ride it back down. Hold it inside tax deferred account, because REITs throw off shit ton of taxable income which can change your tax bracket.

Tiaa real estate is not really comparable to REITS. REITS are stocks and demonstrate the volatility of stocks. TIAA real estate is directly held commercial real estate, presumably without leverage. Held within retirement accounts at TIAA. Behaves very differently. Apples and oranges really.

OK but I wouldn't try to market time the commercial real estate market, either way. I respect TIAA. They require holding inside their annuity, which means penalty if you want your money back before age 59.5, right? But if you're early 50s, that's within consideration. Also high ER, but similar ER to the actively managed REITS. But I don't think its possible to market time commercial real estate market no matter how its packaged. Good luck with that maybe gut instinct works.

[folkher0]

I am really seeking opinions on TIAA Real Estate - but in the context of commercial real estate in general. I have always felt that having a modest allocation to TIAA Real Estate made some sense (just as a diversifier). Even with all of the gloom and doom in commercial real estate, one has to believe that the story is priced-in by now. In other words, even if there has been a fundamental shift in the attractiveness of commercial real estate as an asset class, there has been plenty of time for that to be factored into prices. So really my question is the following - is there any reason to approach commercial real estate differently today than one would have pre-pandemic?

You're trying to market time the commercial real estate market by reading news on internet? That's difficult. Because all real estate is local. Some metro markets outperform others. While some types of building categories outperform others.

If you want to invest in REIT, then just dollar cost average it, steady as she goes. Invest same amount monthly for example, ride the market up and ride it back down. Hold it inside tax deferred account, because REITs throw off shit ton of taxable income which can change your tax bracket.

Tiaa real estate is not really comparable to REITS. REITS are stocks and demonstrate the volatility of stocks. TIAA real estate is directly held commercial real estate, presumably without leverage. Held within retirement accounts at TIAA. Behaves very differently. Apples and oranges really.

OK but I wouldn't try to market time the commercial real estate market, either way. I respect TIAA. They require holding inside their annuity, which means penalty if you want your money back before age 59.5, right? But if you're early 50s, that's within consideration. Also high ER, but similar ER to the actively managed REITS. But I don't think its possible to market time commercial real estate market no matter how its packaged. Good luck with that maybe gut instinct works.

I don't think you understand the fund, which is understandable. Its pretty unique and you would only be interested if it was available to you in a TIAA retirement contract. You can buy or sell it whenever. It has some restrictions that I mentioned above, but its not like the so-called "illiquid" TIAA traditional which you can't get out of without some onerous restrictions.

The ER is something like 0.8. It is pretty high. I’m told that it’s comparable to the “hidden” management expensesof REITs, which occurs within the investment itself and is not reflected in the expense ratio. I wish the ER wasn’t so high, but for a small part of my portfolio and the ability to time it, I can live with it.

Anyway, like I was saying, I can't market time the commercial real estate market, but I can time this fund.



Day to day changes in the fund are minuscule. And it lags the commercial real estate market by months.

With TREA current valuations are NOT factored into the current price. Older valuations are factored into the current price. That is, the current price is ALWAYS stale. Very stale and moldy.

"Stale" and "moldy" are words with negative connotations, but for my purposes they are great. Changes in the trajectory of the fund values take months to take shape. Daily changes are rarely above 0.10%. If you are paying any attention, timing the fund is trivial. Of course you can't put that much money into it these days, so its not gonna make you rich. But its a great alternative fund for a small part of a portfolio.



REITS are just stocks with some peculiar proporties.

[Call_Me_Op]

I am really seeking opinions on TIAA Real Estate - but in the context of commercial real estate in general. I have always felt that having a modest allocation to TIAA Real Estate made some sense (just as a diversifier). Even with all of the gloom and doom in commercial real estate, one has to believe that the story is priced-in by now. In other words, even if there has been a fundamental shift in the attractiveness of commercial real estate as an asset class, there has been plenty of time for that to be factored into prices. So really my question is the following - is there any reason to approach commercial real estate differently today than one would have pre-pandemic?

You're trying to market time the commercial real estate market by reading news on internet? That's difficult. Because all real estate is local. Some metro markets outperform others. While some types of building categories outperform others.

I don't recall using the term market timing or even suggesting a desire to do so. Please re-read my post.

[unwitting_gulag]

I am really seeking opinions on TIAA Real Estate - but in the context of commercial real estate in general. I have always felt that having a modest allocation to TIAA Real Estate made some sense (just as a diversifier). Even with all of the gloom and doom in commercial real estate, one has to believe that the story is priced-in by now. In other words, even if there has been a fundamental shift in the attractiveness of commercial real estate as an asset class, there has been plenty of time for that to be factored into prices. So really my question is the following - is there any reason to approach commercial real estate differently today than one would have pre-pandemic?

You're trying to market time the commercial real estate market by reading news on internet? That's difficult. Because all real estate is local. Some metro markets outperform others. While some types of building categories outperform others.

I don't recall using the term market timing or even suggesting a desire to do so. Please re-read my post.

The statement, "one has to believe that the story is priced-in by now", suggests the following:

1. Recently there's been a spate of bad-news, of relevance to the asset in question.
2. The asset has responded by falling.
3. Reviewing the available information now, it is reasonable to suppose, that this falling, is nearing bottom.
4. Therefore, it seems to be auspicious to start allocating more into this asset, than one had had, heretofore.

This may not be market-timing, in the sense of rampant speculation. But it does come across as adjustment of one's position, on account of recent and current news. Is that not, a form of market timing?

[Call_Me_Op]

I am really seeking opinions on TIAA Real Estate - but in the context of commercial real estate in general. I have always felt that having a modest allocation to TIAA Real Estate made some sense (just as a diversifier). Even with all of the gloom and doom in commercial real estate, one has to believe that the story is priced-in by now. In other words, even if there has been a fundamental shift in the attractiveness of commercial real estate as an asset class, there has been plenty of time for that to be factored into prices. So really my question is the following - is there any reason to approach commercial real estate differently today than one would have pre-pandemic?

You're trying to market time the commercial real estate market by reading news on internet? That's difficult. Because all real estate is local. Some metro markets outperform others. While some types of building categories outperform others.

I don't recall using the term market timing or even suggesting a desire to do so. Please re-read my post.

The statement, "one has to believe that the story is priced-in by now", suggests the following:

1. Recently there's been a spate of bad-news, of relevance to the asset in question.
2. The asset has responded by falling.
3. Reviewing the available information now, it is reasonable to suppose, that this falling, is nearing bottom.
4. Therefore, it seems to be auspicious to start allocating more into this asset, than one had had, heretofore.

This may not be market-timing, in the sense of rampant speculation. But it does come across as adjustment of one's position, on account of recent and current news. Is that not, a form of market timing?

No - not if there has been a fundamental shift in the characteristics of the asset class (which has not been fully priced-in) - which is the essence of my question. We don't experience a world-wide pandemic and a fundamental shift in the location of the workplace on a regular basis.