Commercial real estate’s recent underperformance offers long term investors an attractive entry point

In Q4’23, Real Estate ranked as the best-performing S&P 500 sector, rising nearly 19%, besting the broader Index by over 700 basis points, as investors’ optimism regarding potential interest rate cuts in 2024 intensified. The fed funds futures market priced in six rate cuts beginning in March, as the soft landing moved from best case to base case for 2024. Given its so called “bond proxy” status and the capital intensity of developing properties, the Real Estate sector, including in Seattle, is highly sensitive to the interest rate environment. 

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