Principal Real Estate has been investing in commercial real estate (CRE) for more than 60 years and in core-plus real estate for over 20 years. Having experienced numerous market cycles in that time, we believe CRE values have largely adjusted for the current cycle, setting the stage for an attractive entry point for private equity investors.

The past year was filled with plenty of events, but their market impact turned out to be less eventful than many would have expected. Economic uncertainty and geopolitical risks failed to derail steady performance across most asset classes.

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One hallmark of commercial real estate is its relative stability through cycles, with roughly two-thirds of total returns historically derived from income. Historical trends show recoveries averaging 13 to 15 years, and with credit conditions improving and valuations stabilizing, the market is primed for another growth cycle.

High yield credit offers compelling income opportunities, with starting yields in the 7–8% range historically associated with strong forward returns. Strong fundamentals, including low default expectations and solid credit metrics, provide resilience against the modest spread widening expected in 2025.