Bank of America's Koletic Shares Where to Invest in CRE Now

That lack of clarity is shaping investor strategy. Rather than waiting for definitive signals from the Fed, Koletic says investors need to act based on fundamentals.

"As an investor, you can't really wait for full information in order to capture opportunities," he says.

Koletic frames the market through two interconnected lenses: property operating performance and capital markets. Both ultimately determine value, but the emphasis today is shifting toward what investors can control.

"The things that drive value for real estate are cap rates and cash flow growth. The math is inescapable," Koletic says.

With cap rate expansion likely nearing its limit until interest rate policy becomes clearer, the focus is increasingly on income growth. As Koletic puts it, investors should prioritize growing the numerator faster than the denominator, meaning revenue growth over relying on valuation gains.

That approach is also reshaping how investors think about geography. Instead of starting with pricing or capital trends, Bank of America is leaning into long-term economic and demographic shifts.

One strategy is identifying where investors can "capture secular themes in location, like Silicon Valley for tech, trade in southern California or Southeast, or distribution in Dallas. Make real property investments in certain locations."

This represents a return to fundamentals, with an emphasis on population and economic momentum.

"We're always focused on capital flows and demographics and people flows," Koletic says.

When evaluating markets for client portfolios, the firm prioritizes areas with strong population bases, sustained growth and rising incomes. Those factors tend to align with regions that are easier to do business in and continue to attract both companies and workers.

"Historically, that's really driven us to those easy-to-do-business locations, states that have been magnets for people, magnets for jobs, magnets for capital," Koletic adds. "Some locations have a heavy fiscal burden, which drives up taxes. In some locations, you see where population is migrating out, but the need to provide services increases."

Within that framework, industrial real estate remains a standout.

Bank of America currently views the sector as a "preferred investment category … conveniently located [to a] good quality labor force." The firm is targeting infill assets that are difficult to replicate through new development and flexible enough to serve multiple uses, including last-mile distribution.

The appeal is both operational and financial. Industrial properties typically require less capital expenditure and carry lower operating costs than sectors like office, hospitality or housing, helping investors manage downside risk.

The firm is also leaning into necessity-based retail, particularly grocery-anchored centers and well-located strip retail. On a triple-net basis, those assets can provide a built-in hedge against inflation, offering more stable income streams in an uncertain rate environment.