Confirm you would like to unsubscribe from this list

Don't save

Remove strategy

Confirm you would like to remove this strategy from your list

Welcome to Thornburg

Please select your location and role to help personalize the site.
Please review our Terms & Conditions


Please read the information below. By accessing this web site of Thornburg Investment Management, Inc. ("Thornburg" or "we"), you acknowledge that you understand and accept the following terms and conditions of use.


Products or services mentioned on this site are subject to legal and regulatory requirements in applicable jurisdictions and may not be licensed or available in all jurisdictions and there may be restrictions or limitations to whom this information may be made available. Unless otherwise indicated, no regulator or government authority has reviewed the information or the merits of the products and services referenced herein. Past performance is not a reliable indicator of future performance. Investments carry risks, including possible loss of principal.

Reference to a fund or security anywhere on this website is not a recommendation to buy, sell or hold that or any other security. The information is not a complete analysis of every material fact concerning any market, industry, or investment, nor is it intended to predict the performance of any investment or market.

All opinions and estimates included on this website constitute judgements of Thornburg as at the date of this website and are subject to change without notice.

All information and contents of this website are furnished "as is." Data has been obtained from sources considered reliable, but Thornburg makes no representation as to the completeness or accuracy of such information and has no obligation to provide updates or changes. Thornburg disclaims, to the fullest extent of the law, any implied or express warranty of any kind, including without limitation the implied warranties of merchantability, fitness for a particular purpose and non-infringement.

If you live in a state that does not allow disclaimers of implied warranties, our disclaimer may not apply to you.

Although Thornburg intends the information contained in this website to be accurate and reliable, errors sometimes occur. Thornburg does not warrant that the information to be free of errors, that the functions contained in the site will be uninterrupted, that defects will be corrected or that the site and servers are free from viruses or other harmful components. You agree that you are responsible for the means you use to access this website and understand that your hardware, software, the Internet, your Internet service provider, and other third parties involved in connecting you to our website may not perform as intended or desired. We also disclaim responsibility for damages third parties may cause to you through the use of this website, whether intentional or unintentional. For example, you understand that hackers could breach our security procedures, and that we will not be responsible for any related damages.

Thornburg Investment Management, Inc. is regulated by the U.S. Securities and Exchange under U.S. laws which may differ materially from laws in other jurisdictions.

Online Privacy and Cookie Policy

Please review our Online Privacy and Cookie Policy, which is hereby incorporated by reference as part of these terms and conditions.

Third Party Content

Certain website's content has been obtained from sources that Thornburg believes to be reliable as of the date presented but Thornburg cannot guarantee the accuracy, timeliness, completeness, or suitability for use of such content. The content does not take into account individual investor's circumstances, objectives or needs. The content is not intended as an offer or solicitation with respect to the purchase or sale of any security or other financial instrument or any investment management services, nor does it constitute investment advice and should not be used as the basis for any investment decision.


No determination has been made regarding the suitability of any securities, financial instruments or strategies for any investor. The website's content is provided on the basis and subject to the explanations, caveats and warnings set out in this notice and elsewhere herein. The website's content does not purport to provide any legal, tax or accounting advice. Any discussion of risk management is intended to describe Thornburg's efforts to monitor and manage risk but does not imply low risk.

Limited License and Restrictions on Use

Except as otherwise stated in these terms of use or as expressly authorized by Thornburg in writing, you may not:

  • Modify, copy, distribute, transmit, post, display, perform, reproduce, publish, broadcast, license, create derivative works from, transfer, sell, or exploit any reports, data, information, content, software, RSS and podcast feeds, products, services, or other materials (collectively, "Materials") on, generated by or obtained from this website, whether through links or otherwise;
  • Redeliver any page, text, image or Materials on this website using "framing" or other technology;
  • Engage in any conduct that could damage, disable, or overburden (i) this website, (ii) any Materials or services provided through this website, or (iii) any systems, networks, servers, or accounts related to this website, including without limitation, using devices or software that provide repeated automated access to this website, other than those made generally available by Thornburg;
  • Probe, scan, or test the vulnerability of any Materials, services, systems, networks, servers, or accounts related to this website or attempt to gain unauthorized access to Materials, services, systems, networks, servers, or accounts connected or associated with this website through hacking, password or data mining, or any other means of circumventing any access-limiting, user authentication or security device of any Materials, services, systems, networks, servers, or accounts related to this website; or
  • Modify, copy, obscure, remove or display the Thornburg name, logo, trademarks, notices or images without Thornburg's express written permission. To obtain such permission, you may e-mail us at info@thornburg.com.

Severability, Governing Law

Failure by Thornburg to enforce any provision(s) of these terms and conditions shall not be construed as a waiver of any provision or right. This website is controlled and operated by Thornburg from its offices in Santa Fe, New Mexico. The laws of the State of New Mexico govern these terms and conditions. If you take legal action relating to these terms and conditions, you agree to file such action only in state or federal court in New Mexico and you consent and submit to the personal jurisdiction of those courts for the purposes of litigating any such action.


You acknowledge and agree that Thornburg may restrict, suspend or terminate these terms and conditions or your access to, and use, of the all or any part this website, including any links to third-party sites, at any time, with or without cause, including but not limited to any breach of these terms and conditions, in Thornburg's absolute discretion and without prior notice or liability.


Give Us a Call

Fund Operations

A finished building and its construction phase lie on opposite sides of an image.
Real Estate

Rethinking Real Estate Opportunities and Risks

Learn how our real estate team approaches the challenge of finding assets that mitigate inflation risks and generate stable income in this volatile environment.

The Property Market is Beginning to React to the Fed’s Tightening Cycle

It is no surprise that quickly rising interest rates, stubbornly high inflation, and fears of a looming recession are changing the risk-reward calculation for many real estate investors in both public and private markets. After more than three decades of a low inflation environment, the U.S economy is experiencing broad-based inflation at rates not seen in many years. As a result, the Federal Reserve has raised rates five consecutive times over the past year. Given August 2022 inflation data coming in higher than expected again (e.g., consumer price index rising to 8.3%), rate hikes will likely continue and have an impact on real estate assets.

For example, as seen in Figure 1, while most real estate indices are still showing double-digit gains over the past year, the overall pace of growth across major U.S commercial properties has already decelerated. Taking a closer look at the table below, the RCA CCPI (Real Capital Analytics commercial real estate prices) National All-Property Index rose 11.1% over the past year, which is a slower pace than that of the record growth seen in January 2022, prior to the Fed’s aggressive rate hikes. We anticipate valuations will continue to contract, potentially creating an opportunity for investors to buy at more attractive prices.

Figure 1: The Velocity of Annual Price Growth Has Cooled Across All Property Types

Despite shifts in the market driven by the upward pressure on interest rates and rising inflation, we believe that certain segments of the real estate market feature attractive long-term fundamentals. This is especially true for property types that can benefit from inelastic demand, shorter lease terms, and pricing power that can keep up with inflation. With the right properties, real estate can be an important ally to investors’ portfolios amid evolving macro conditions.

Sizing up Opportunities and Risks

The broad category of real estate includes various sub-asset classes. Commercial real estate, in particular, includes buildings that can generate rental income for investors and are generally spread across four main sectors — multifamily (or apartment buildings), office, industrial, and retail. It also includes more specialized sectors such as hotels, data centers, self-storage, senior housing, student housing, and life-sciences.

Choppier waters ahead will call for a more nuanced approach to distinguishing properties within these sectors that will be better equipped to handle a softer economy and a potentially prolonged inflationary environment. Given the macroeconomic conditions ahead, we favor real estate assets that possess strong long-term fundamentals with attractive valuations, as well as characteristics such as strong pricing power and durable cashflows to better combat inflation.

More specifically, our team prefers properties that have shorter lease terms to ensure that rent escalations can keep up with — or not fall too far behind — near- to mid-term inflation levels. For example, multifamily apartments offer a 12-month term lease structure. Additionally, a portion of tenants turn over each month to allow for frequent opportunities for landlords to reset rents to track inflation. Other worthwhile opportunities to consider include niche areas such as self-storage and hospitality, where rents are charged on a monthly or even nightly basis. However, both asset classes could be affected by a slowing economy. Industrial properties are another area where we see attractive opportunities. Although industrial real estate assets do not generally feature short-term leases, they continue to enjoy strong long-term fundamentals due to secular shifts.

On the flip side, certain segments of the retail sector feature higher levels of risk due to secular trends, although pockets of opportunity do exist. During the pandemic, consumer preferences continued to shift toward the convenience of online shopping versus at brick-and-mortar stores. Although this has since reversed, we anticipate a continued bifurcation of performance within the retail sector, with retail asset type and location driving performance. Moving forward, we see merchants continuing to increase their online presence, while adopting a multichannel strategy to capture sales.

The office sector also presents unique risks. Generally, office buildings tend to have relatively long lease terms (e.g., 5-10 years) which creates inflationary risk for investors compared to multifamily units. In addition, remote and hybrid work have accelerated the need to redesign office spaces with a focus on collaboration and amenities. Thus, we are seeing a significant bifurcation between high-end, newly-developed office buildings — those with state-of-the-art amenities intended to attract workers back in the office — versus older offices that haven’t made such capital improvements. Similar to retail, a “winner take all” pattern may be emerging as currently 15% of office buildings contain roughly 80% of office vacancy nationally, according to Cushman and Wakefield.[1] All things considered, the office sector contains many risks, with limited pockets of value.

We believe having a strong research process that looks across siloes, including public and private markets, will be critical in identifying idiosyncratic risks and uncovering opportunities across all real estate asset classes

The Case for Multifamily

The multifamily sector is facing its share of challenges and uncertainties. However, we believe this segment offers more reliable growth and lower volatility characteristics than other property types due to several converging factors.

  1. Housing supply and demand imbalance — The persistent structural lack of housing inventory, as seen in Figure 2, is one of the key drivers of housing cost increases (and inflation overall across the U.S.). The combination of surging home prices and increasing mortgage rates has made homeownership a challenging endeavor for many which, in turn, has driven up demand for multifamily apartments. For this reason, more housing units should be built to help address the housing shortage and cost pressures on renters and buyers. However, barriers to new supply, including inflationary cost increases and a higher cost of financing, could lead to a continued supply/demand imbalance moving forward. Although apartment rents have begun to cool, multifamily should continue to provide stable income and growth in the long-term.
  2. Secular trends — The pandemic accelerated the adoption of hybrid and work-from-home trends across many industries. This widespread shift in work and lifestyle preferences has had an impact on multifamily demand side trends, especially from a geographical perspective. One example is the migration towards Sun Belt metropolitan areas, including in the Southwest and mountain west.  This “Sun Belt migration” has made multifamily housing in these regions desirable investments and we expect to see continued growth in these regions in the long-term.
  3. Shorter-term lease — Real estate has long enjoyed a reputation for being a good inflation hedge and we find this especially true for multifamily properties.  Apartment leases are generally short-term in nature which allows for the ability to reprice rents to keep up with inflation. Furthermore, since multifamily properties house multiple tenants at a time, the source of rental income is also more diversified which provides more consistent cash flow than other real estate sectors.

Figure 2: Housing Supply and Demand Imbalances

The Case for Industrial Real Estate

Manufacturers are facing an onslaught of challenges today due to supply chain disruptions, labor shortages, and rising wages. Historically, offshoring has been the key to overcoming some of these issues, but now companies are increasingly looking to reduce their reliance on global supply chains, especially after years of trade disruptions precipitated by Covid-19 and growing geopolitical tensions. For the industrial sector, “nearshoring” or bringing manufacturing closer to home, has been the answer for many. Over the coming years, we believe the rise of nearshoring activity will create a robust demand for localized distribution centers, warehouses, and manufacturing factories.

In addition to nearshoring, supply chain shocks have caused a shift in inventory management strategies for companies. Most notably, as companies anticipate continued inventory bottlenecks and shortages, many have transitioned from a “just-in-time” to a “just-in-case” delivery strategy. This has translated into companies ordering larger inventories than usual and storing it at warehouses for longer periods, which has increased the real estate footprint for global industrial users.

There are many other driving forces that make industrial real estate an attractive opportunity. For example, e-commerce companies are seeing strong growth as people rely more heavily on online orders, necessitating more warehouses and distribution centers across geographies. Lastly, the overall “digitization of our lives” and electrification trends are poised to increase the need to bring semiconductor manufacturing closer to home, especially for electric vehicle makers. In August, President Joe Biden signed the CHIPS and Science Act of 2022 into law, which allocates $53 billion dollars in federal funding to manufacture semiconductor chips domestically. This has driven a flurry of activity in terms of facility and new plant development announcements from major semiconductor companies such as Samsung Electronics, Taiwan Semiconductor, and Micron Technology.

Given this demand backdrop, industrial vacancy is limited, especially in the coastal markets. As seen in Figure 3, vacancy rates for the industrial sector are at historical lows, despite a rise in the overall industrial footprint available (i.e., completions). Consequently, many companies are looking at new areas where raw land is more abundant, not only to build and develop their own manufacturing facilities, but also where their suppliers and other key partners can have a presence. Some examples include:

  • Samsung Electronics is investing $17 billion in a new semiconductor plant in Taylor, Texas.
  • Taiwan Semiconductor is building a $12 billion plant in Phoenix, Arizona.
  • Micron announced the development of a $20 billion chip factory in Clay, New York.
  • Mexico, with its skilled labor force, sophisticated manufacturing base, and friendly proximity to the U.S. has been the ideal target for many nearshoring manufacturing activities.

Figure 3: Industrial Sector Supply and Demand Trends

Putting it all Together

While macroeconomic conditions will always continue to evolve and present challenges, we believe uncertain times can also create opportunities if managers know where to look for them. As discussed, real estate as an asset class still possesses many attractive characteristics even in a higher rate and inflationary environment, especially in areas where strong rental pricing power exists, lease terms are shorter, and secular trends provide a catalyst for growth. We find that both multifamily and industrial properties hold some of these key advantages compared to other real estate sectors.

Looking ahead, we believe real estate market volatility will persist and market conditions will remain challenging due to the continued transition toward a higher cost of capital environment. This could bring near-term pains, but also long-term opportunities to real estate investors. During this period of heightened complexity, we believe constructing a balanced real estate portfolio that focuses on properties with attractive valuations that can deliver dependable cash flows will be crucial in mitigating the risks associated with the transition toward a lower economic growth and higher rate environment.


Discover more about:

Stay Connected

Subscribe now to stay up-to-date with Thornburg’s news and insights.

More Insights

Businesswoman standing alone at cubicle in empty office contemplating commercial real estate as an opportunity.
Real Estate

Turning Commercial Real Estate Distress into Opportunity

Commercial real estate borrowers and lenders have been under immense stress recently. How worried should investors be? Can distress become an opportunity?
Investing in artificial intelligence (AI) and machine learning (ML).
International Growth

Tread Carefully: Investment Opportunities in Artificial Intelligence

Portfolio Manager Sean Sun shares his thoughts about investment opportunities arising from AI models and the advantages of active management.
Arrows hit the bulls eye on the target just as the Fed is adjusting to bring down prices.

Can the Fed Bring Prices Down to Its 2% Target?

Co-Heads of Investments Jeff Klingelhofer and Ben Kirby look at what it will take for the Fed to consider cutting interest rates.
Dream, plan, and achieve no matter the height, wire walker crosses high rise buildings.
Advising Clients

Dream. Plan. Achieve.

We may not know what inspires our dreams, but there is proof that anything is possible if we take steps to make our dreams come true.
Fears of recession create worry for a young woman sitting by her computer.
Markets & Economy

Global Market Observations: Is a Recession a Foregone Conclusion?

Co-Heads of Investments Jeff Klingelhofer and Ben Kirby discuss the possibility of a recession in the U.S. and the impact of higher capital costs.
Global Markets loom above as risk assets ride out the banking scare.
Markets & Economy

Global Markets Observations: Risk Assets Ride Out the Banking Scare

Co-Heads of Investments Jeff Klingelhofer and Ben Kirby discuss market resiliency through the banking tremors and where valuations appear attractive.

Our insights. Your inbox.

Sign up to receive timely market commentary and perspectives from our financial experts delivered to your inbox weekly.
This field is for validation purposes and should be left unchanged.