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Speaker 1: Let's get to our next guest. Memoriality is investment strategy

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Speaker 1: analyst and e s G leaders Santa Square Investment Management

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Speaker 1: and UMA. Santa Square of course has a focus on

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Speaker 1: actively managed real estate. But as we've got this environment

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Speaker 1: of rising rights, people's relationship with the office changing, how

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Speaker 1: resilient is real estate looking as an investment right now?

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Speaker 1: Thanks for having me. You know, as we think about

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Speaker 1: real estate, and you brought up the return to office

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Speaker 1: and what that means if we think specifically just about

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Speaker 1: listed real estate, right how investors can invest in in

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Speaker 1: rural state across public markets. Office is actually a very

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Speaker 1: small part of that universe anymore so even if we

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Speaker 1: think about let's say, even just in the US and

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Speaker 1: the rates that you can invest in as an investor,

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Speaker 1: office is only five of that universe today, a much

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Speaker 1: larger part today in things like rental housing, data centers,

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Speaker 1: industrial warehouses. So there are a lot of opportunities for

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Speaker 1: investors to take advantage investing in some really strong fundamentals

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Speaker 1: in the royal state market elsewhere and not be invested

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Speaker 1: in office. We were looking ahead to some of the

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Speaker 1: economic news that we're going to be featuring this week,

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Speaker 1: much of what we're expecting is going to cover the

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Speaker 1: real estate and more on the home ownership side of things. Um,

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Speaker 1: when you look at what the FIT has been trying

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Speaker 1: to engineer and bringing down inflation through rising raising interest rates,

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Speaker 1: I'm wondering, are you able to kind of speculate on

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Speaker 1: how this may play out in the real estate market

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Speaker 1: and when we may see the the end of this

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Speaker 1: tightening cycle. That's I think that's the million dollar question, right. Um.

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Speaker 1: You know, the the inflation prints more recently that we

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Speaker 1: have been seeing out of the economy have not been

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Speaker 1: supporting any sort of a reversal in in fed strategy. Right.

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Speaker 1: So at this point, market now looking at two more

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Speaker 1: seventy five basis point hikes this year, and so that

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Speaker 1: cumulative impact of the aggressive tightening policy is building and

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Speaker 1: that's going to This serves as a head wind on

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Speaker 1: on the economy in many different ways for the markets

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Speaker 1: from an earnings perspective, and as you mentioned right on

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Speaker 1: on Main Street, it's impacting the way that homeownership and

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Speaker 1: the affordability of that homeownership is changing fairly dramatically. And

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Speaker 1: so in that situation, something that we actually have a

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Speaker 1: fairly strong conviction in here at center square is rental

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Speaker 1: presidential real estate, because as as owning a home becomes

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Speaker 1: less and less affordable for for most people out there,

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Speaker 1: they're going to be shifting their attention to renting a home.

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Speaker 1: And that's where we're seeing a continued level of strength

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Speaker 1: in the marketplace. But does the randal market face its

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Speaker 1: own challenges? And I can just speak to the experience

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Speaker 1: here in Australia where the market is now extremely tight

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Speaker 1: and rent is really struggling with rising costs as well.

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Speaker 1: Is this right story as well or is it apparently

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Speaker 1: a supply story. It's a little bit of both and

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Speaker 1: and a big issue, especially here in the US, is

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Speaker 1: that we are just structurally under from a housing perspective,

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Speaker 1: and that really came out of the GFC, and so

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Speaker 1: we are continuing to see a meaningful undersupply of housing

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Speaker 1: and that is driving some of the increases and rents

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Speaker 1: that we have been seeing over the last twenty four months.

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Speaker 1: The astronomical rate increases that we were seeing have started

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Speaker 1: to somewhat normalize at this point, and so from just

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Speaker 1: an affordability perspective, we are starting to see that a

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Speaker 1: little bit normalized. The other part of the equation to

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Speaker 1: really pay attention to is the fact that we have

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Speaker 1: seen incomes increase as well. And so something that we

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Speaker 1: pay attention to in the rental residential market is that

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Speaker 1: rent to income ratio, and we've actually seen that, say,

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Speaker 1: relatively stagnant throughout COVID, despite the fact that you saw

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Speaker 1: those massive rent increases, because you also saw incomes keeping

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Speaker 1: keeping in, you know, in pace with that. And so

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Speaker 1: at this point we're not really necessarily thinking about rental

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Speaker 1: as as being necessarily unaffordable, and that will continue to

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Speaker 1: be something that provides a housing option, as we've talked

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Speaker 1: about being unaffordable from especially the ownership perspective now for

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Speaker 1: most consumers out there. Well to Paul's point, I mean

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Speaker 1: the last cp I print that we had here in

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Speaker 1: the US, the rent portion was a strong contributor to

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Speaker 1: the game that we saw in the last month, which

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Speaker 1: I believe overall headline was around eight point two. But

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Speaker 1: if you're looking at opportunities in the rental market to

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Speaker 1: take a position in a real estate whether it's a

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Speaker 1: real estate investment trust or or some other vehicle that

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Speaker 1: would invest in real estate where you have rental properties,

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Speaker 1: are there how does this breakout geographically? Are there areas

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Speaker 1: of the country in the US right now that that

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Speaker 1: you would be more willing to put money to work in,

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Speaker 1: and are there areas that you would avoid? Absolutely, as

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Speaker 1: we think about real estate, the fundamental supply and demand

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Speaker 1: perspective is important to hold. Something that we really saw

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Speaker 1: during the pandemic was this massive in migration and the

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Speaker 1: U US towards the sun Belt states right the southeast

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Speaker 1: southwest states, and we saw people kind of migrating out

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Speaker 1: of the coastal cities. What we're seeing now is a

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Speaker 1: reversal of that as people are starting to return to

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Speaker 1: the office, albeit to three days a week, and at

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Speaker 1: the same time, supply in those coastal markets is very restricted.

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Speaker 1: So as we look forward into what we anticipate to

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Speaker 1: be a very strong rental market in the coming twelve

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Speaker 1: the twenty four months, those coastal gateway cities, that's where

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Speaker 1: we're really focused. Okay, Uma, good stuff, Thank you so

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Speaker 1: much for being with us. Uma Moriarty is investment strategy

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Speaker 1: analyst and e S G Lead at Center Square Investment Management.

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Speaker 1: Joining us on Daybreak Asia from Philadelphia, Pennsylvania,