After Heavy Credit Focus, Invesco Real Estate Eyeing Equity Deals In 2025

Invesco is planning on shifting more from credit to equity real estate investments in 2025, signaling a potential change in how some large industry dealmakers assess the start of a new investing cycle. 

“Our No. 1 conviction has been in credit because of the relative value,” Bert Crouch, portfolio manager and head of North America for Invesco Real Estate, told Bisnow. “We are now starting to see more and more opportunity on the equity side.”

Invesco, a $1.5T global investment management firm, founded its dedicated real estate arm in 1983, which now has more than $85B of assets under management across 21 cities. 

Last year, Invesco Real Estate deployed almost $3B in loan originations, taking advantage of the vacuum left in the credit market caused by the pullback from banks. 

The tide started to change at the end of the year. After Blackstone executives said in July that “a new cycle” was at hand, KKR analysts in November advocated for private real estate equity and debt to take up a larger chunk of investment portfolios. MSCI noted that investor sentiment was improving, as values have appeared to hit bottom. 

Crouch said institutional investors have heard that drumbeat of optimism and are ready to act on it.

“You're starting to feel that that sea change, that shift where people are saying, ‘All right, we got the rate cuts, we got the value trough, we got the election, and the stock market's way up,’” he said. “That is a great collective signal that people are overallocated to other asset classes, underallocated to real estate.”

The last major shift happened about four years ago, following the most acute period of the pandemic when interest rates were close to zero. Another recovery is coming — but it isn’t going to be smooth, Crouch said.

“It just is not going to be V-shaped. It's going to be bumpier,” he said. “It's not going to be just pick one sector and ride a wave like we did in 2021, in early ‘22 with industrial relative to office.”

With interest rates elevated, this time around demands a more refined approach than predicting success based on asset class alone, he said. In addition to being the right type of building, investments also have to be in the right location and have to be able to be creatively financed.

For Invesco, this year, a proper target looks like build-to-rent and single-family rentals. The firm is also looking at manufactured housing for similar reasons: in Crouch’s words, it “plays on the residential trend, but it's not overbuilt like apartments.” For IRE, manufactured housing can be bought one-off before being aggregated into a portfolio and then being sold “at a portfolio premium.”

The other area IRE is looking at as it heads into 2025 is healthcare, particularly catered toward aging demographics, as the average baby boomer is now past retirement age and the youngest approaches 60.

“We've been talking about it for the better part of two decades,” Crouch said. “They are finally hitting with the baby boomers.”

Medical office and need-based retail are both attractive options, with normalized rents, little development over the past decade and vacancy steadily trending downward, he said.

When asked if there were any investments that look less appealing, Crouch pointed to excess supply in multifamily and industrial in the Sun Belt markets, particularly in Texas and Florida, although he added that construction has slowed in the past 18 months.

“We're seeing that cliff coming in a good way,” he said.

As for how the incoming administration of President-elect Donald Trump affects thinking, Crouch said the broader investment themes hold irrespective of what happens politically. The organization, like any of its peers, can’t be sure which policies may be enacted rather than just discussed.

“As a firm, we try not to project interest rates. Same thing on certain policy initiatives,” Crouch said. “That said, we don't want to be tone-deaf either.”

Invesco is looking closely at how the impact of increased tariffs on Mexican and Canadian goods might affect its investments, such as in warehouses along the Texas-Mexico border.

“Could tariffs affect that within Mexico and the free trade agreements governing Canada and Mexico? It is possible,” he said. “Our general view is it's just more choppy in the interim, but the long-term trends will still remain intact. What we're trying not to do too much is pivot.”