Episode summary
Episode 25: Special Feature: Live from the NYSE with Guest Jeb Belford, Clarion Partners
Alternative Allocations
· · Hosts: Tony Davidow · Guests: Jeb Belford
Summary
Jeb Belford argued that private real estate entered 2026 from a much better starting point than many investors expected, because values had already reset about 20% from the peak in 2022 and were now below replacement cost. He said that matters because it is hard to build new supply accretively, while owners can often benefit as rents and NOI recover. His baseline view was still constructive at the start of the year: the economy, inflation, rates, and transaction activity all looked supportive of a new cycle in property markets.
He said the recent tariff shock has not changed the long-term thesis much, because the big drivers of the asset class are demographic change, innovation, a persistent housing shortage, shifting trade patterns, and resiliency. Belford argued that industrial real estate remains especially well positioned, even if trade flows keep changing, because e-commerce, near-shoring, on-shoring, and manufacturing growth should keep supporting demand. He also said multifamily, life sciences, and other housing-linked sectors continue to benefit from household formation and aging demographics.
The clear negative outlier was office. Belford said office fundamentals remain weak, vacancy is high, and tenant demand has shifted permanently lower, with average space needs down about 20% to 25%. He expects only the top slice of assets to remain strong, a middle group to survive, and a large portion of office stock to face difficult outcomes or eventual conversion.
Key takeaways
- Belford said private real estate values are about 20% below the 2022 peak, creating more attractive entry points below replacement cost.
- He believes industrial remains one of the best-positioned sectors because e-commerce, trade re-routing, and more on-shoring can all add demand.
- He said the housing shortage is still estimated at 3 to 5 million units, which supports rental and for-sale housing.
- Belford argued office is structurally weak, with vacancy high and tenant space needs down about 20% to 25%.
- He said the most durable real estate bets are driven by five themes: demographics, innovation, housing shortage, shifting trade patterns, and resiliency.
Notable quotes
“We now have what most people estimate to be 3 and 5 million units of all kinds of housing, everything short of what we should have”
“office fundamentals are very weak. Vacancy's climbed very significantly”
“the overall average of what the tenant decides to take for space, whether they stay or move, compared to what they had before, it's about plus or minus 20 to 25% less”
How the episode opens
This is Alternative Allocations by Franklin Templeton. A monthly podcast where we share practical, relatable advice, and discuss new investment ideas with leaders in the field. Please subscribe on Apple, Spotify, or wherever you get your podcast to make sure you don't miss an episode.
Here is your host, Tony Davidow. Welcome to the special edition of the Alternative Allocations podcast. We recently hosted an episode live from the New York Stock Exchange where Clarion Partners hosted a client event.
I had the chance to sit down with Jeb Belfort, CIO of Clarion Partners, to discuss the state of private real estate and opportunities in the asset class. I hope that you enjoy our discussion. I know you and I have been having this discussion, it seems like, for the last year.
But, coming into the year, we're both feeling pretty constructive about the opportunities for real estate. Valuations had come down. Clearly, there were opportunities which were troubling, offices, but great opportunities in industrials and multifamily and life sciences and all.
How did we start the year? What was the view that you had, and how has that changed over the last several months here? Well, I'm going to start by a couple things you just said.
We've come off a period of readjustment to new cost of capital and debt rates. So, in our space, we've lost about 20% of value from the peak in 2022. That has brought values down to below replacement cost, and that's a big deal in our world.
When you can buy assets at below replacement cost, knowing that it's very difficult to build new product accretively, you can kind of ride rents and NOI up until the point when construction becomes more viable. So, you usually have a pretty good period of returns ahead of you if you feel like you can actually get in at a pretty good basis.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- private real estate outlook
- industrial real estate resilience
- multifamily real estate
- life sciences real estate
- office sector challenges
Companies and tickers mentioned
- Clarion Partners
- Winthrop Financial Associates
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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