Key Takeaways
- • Manulife Investment Management identifies today's higher-rate environment as presenting one of the strongest buying opportunities for selective core and core-plus real estate investors, despite increased market challenges.
- • Unlevered underwriting returns for core real estate have reset to approximately 7 percent, with projected returns ranging from 6.5 to 7.5 percent in the current interest rate regime.
- • Core-plus strategies, typically employing 45-60 percent leverage, remain positioned to generate 8-10 percent annual returns as a potentially attractive long-term income and capital appreciation vehicle.
- • Marc Feliciano and Maggie Coleman of Manulife Investment Management emphasize that return generation in elevated-rate environments depends less on market appreciation and more on disciplined asset selection and operational execution.
Summary
Manulife Investment Management's leadership team has identified a compelling vintage opportunity for core and core-plus real estate investing, despite macroeconomic headwinds from sustained higher interest rates. According to Marc Feliciano and Maggie Coleman, the current market environment—while more challenging than prior cycles—presents one of the strongest buying opportunities for institutional investors willing to apply selective underwriting discipline.
The higher-rate environment has fundamentally altered return assumptions across the core real estate spectrum. Unlevered underwriting for core assets has reset to approximately 7 percent, with actual projected returns ranging from 6.5 to 7.5 percent. This recalibration reflects the structural impact of elevated cost-of-capital on traditional core asset performance. Core-plus strategies, which typically employ between 45 and 60 percent leverage, remain positioned to deliver 8-10 percent annual returns, offering a more attractive risk-adjusted profile for investors comfortable with moderate leverage and active management.
A critical insight from Manulife's thesis is that return generation in today's market depends materially less on passive market appreciation and more on fundamental selection—including rigorous tenant quality assessment, location analysis, and operational value-add initiatives. This structural shift creates a bifurcated market where disciplined, research-driven managers with integrated asset management capabilities and operational expertise have a significant competitive advantage over generalist or passive approaches.
Manulife Investment Management's global real estate platform spans core, core-plus, value-add, and credit strategies, supported by integrated research and portfolio construction capabilities designed to capitalize on this market dislocation. The firm's positioning reflects broader institutional recognition that elevated rates have reset risk-return expectations, making vintage selection and manager differentiation paramount for long-term capital deployment in private real estate.
The higher-rate environment has fundamentally altered return assumptions across the core real estate spectrum. Unlevered underwriting for core assets has reset to approximately 7 percent, with actual projected returns ranging from 6.5 to 7.5 percent. This recalibration reflects the structural impact of elevated cost-of-capital on traditional core asset performance. Core-plus strategies, which typically employ between 45 and 60 percent leverage, remain positioned to deliver 8-10 percent annual returns, offering a more attractive risk-adjusted profile for investors comfortable with moderate leverage and active management.
A critical insight from Manulife's thesis is that return generation in today's market depends materially less on passive market appreciation and more on fundamental selection—including rigorous tenant quality assessment, location analysis, and operational value-add initiatives. This structural shift creates a bifurcated market where disciplined, research-driven managers with integrated asset management capabilities and operational expertise have a significant competitive advantage over generalist or passive approaches.
Manulife Investment Management's global real estate platform spans core, core-plus, value-add, and credit strategies, supported by integrated research and portfolio construction capabilities designed to capitalize on this market dislocation. The firm's positioning reflects broader institutional recognition that elevated rates have reset risk-return expectations, making vintage selection and manager differentiation paramount for long-term capital deployment in private real estate.
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