In a market still finding its footing after years of volatility, real estate investors face no shortage of uncertainty. But even amid shifting interest rates, uneven job growth and lingering geopolitical pressures, there are still ways to move forward, says Gordon Black, executive vice president at real estate investment management firm Heitman.
Speaking with GlobeSt.com, Black says the key lies in paying close attention to the indicators. He points to the NCREIF NFI-ODCE fund, which has shown “very flat or nominally upward adjustments” over the past several quarters — a sign, he notes, that some stability is returning to the market. Prices are becoming more aligned than they were two years ago, GDP is trending upward and the outlook for 2026 appears brighter despite some continuing uncertainty around cap rates.
“I think 2026 is going to be a much better year and probably be a little bit more like what people were hoping at the end of 2024 that 2025 would look like,” Black says.
“I think we're going to return to a more normalized market, one that probably places a pretty high premium on income as opposed to more capital appreciation.” That shift, he adds, is already being reflected in Heitman’s underwriting models.
“With the healing of the last couple of years, I think we're ready to get back into the more normal business.”
Black says multifamily and logistics remain Heitman’s top choices because they’re supported by underlying demographic trends rather than cyclical economic forces.
“They offer demographically driven real estate,” he explains, “based on secular and structural changes, demographic needs and wants, rather than economic cycles.”
Other sectors that align with core-plus strategies include self-storage, medical office buildings and student housing.
“Some people put data centers in there,” Black notes, though Heitman’s stance on those assets remains cautious.
“We're generally positive on data centers, but we're not huge data center investors. They're tricky. Are they infrastructure? Are they real estate? I don't really think the market fully understands what they're going to label it.”
For Heitman, the definition of “core” focuses on essential assets driven by a consistent mix of demographics and long-term needs — not on whether the economy happens to be in a bullish or bearish phase. The “plus” in core plus typically involves higher-quality, newer buildings with better amenities and longer life cycles.
“Core Plus says it’s giving you latitude to say, ‘I have slightly higher risk profiles, not materially, slightly higher risk tolerances,’” Black explains. “And I'm always going to be looking at in aggregate. How much risk am I taking? Where am I taking it? Is that within the risk confines that we deem to be core?” That approach, he says, leaves room for limited value-add activity — but only in a measured way.
With cash flow now carrying greater weight in Heitman’s models, Black emphasizes the importance of income resilience. Strong cash income can offset the need for price appreciation and reduce the pressure on asset values to drive returns. However, he cautions investors to clearly understand what “core plus” means in any given strategy.
“I have seen some circumstances where it was a barbell approach,” he says.
“Some people were doing very core things with a lot of leverage, and doing some things that looked more like value add and opportunistic deals trying to blend out to a higher return.” That, he warns, can lead to one of the biggest mistakes in core investing — overleveraging.
“Highly leveraged core is risky,” Black says. “Investors may also need to be operationally active to keep value from dribbling away.”
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