Expectations & Market Realities in Real Estate is now in its 18^th year of publication. Over the years, we have experienced highs and lows in the real estate market. We saw the devastating economic impact of the Global Financial Crisis (GFC) and the record-long recovery that followed. One year ago, we thought that we were approaching the peak of the market with the lowest imaginable interest rates.

Then, a few weeks after we published our annual report, a worldwide pandemic shut down the economy. The investment environment changed drastically and remains volatile even as widespread distribution of vaccines gives us hope for a return to normalcy. In this dramatically different environment, investors are looking to find alpha, the excess returns on an investment relative to benchmark returns.

While industrial generally thrived during the pandemic, due to soaring e-commerce sales, and multifamily held steady, thanks in part to eviction moratoriums and federal stimulus checks, many retailers and hotel chains were crushed by the pandemic, and the office sector remains a question mark because so many people are still working from home. We expect investors to find alpha within the specialized commercial real estate (CRE) sectors, such as self-storage, data centers, land and single-family rentals.

The Fed has vowed to keep interest rates historically low for the foreseeable future and provided much-needed liquidity to keep the economy afloat during the darkest, earliest days of the pandemic. This helped the stock market recover from its historic plunge last spring, but the miniscule yields on the Treasury bonds have made bonds the least attractive of investment alternatives. Overall CRE appears poised to be the best alternative in 2021, especially for those who emphasize risk assessment and navigation and critically examine property fundamentals before making their investment decisions.