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Well, we start today with the news out of Vatican City. Cardinal Robert Francis Privos was elected to the head of the Catholic Church. It was the second day of voting in the Vatican. It was the first It is the first US national ever to take the role. He's sixty nine years old. He was born in Chicago. He spent much of his life outside the US, mostly in Peru and Rome. Leo the fourteenth is the name that he has taken. He spoke for about ten minutes last hour
in Italian, Spanish and Latin as well. For more, we bring in Natalia Imparatory Lee Professor and Chair of Religious Studies at Manhattan College. Professor, good to have you with us this afternoon. We are sort of slowly learning details of the new pope. The big question I have is what direction do you think he will take the church in?
Thanks for having me. Yeah, I think this is a really interesting choice. We can tell a lot from him by the choice of name. In choosing Leo the fourteenth, I think he's indicating that he wants to continue the work of one of the most consequential popes on the topic of social justice. So Leo the thirteenth wrote a huge encyclical called Reream Navarum, and it basically set the
agenda for the social work of the church. And so I think this American pope is signaling to us that he will be on this sort of maybe a little bit kind of on the progressive vein that you saw Francis in.
Yeah, it does look like that is an insane clicole that was aimed at the working class. And of course Pope Francis was first and foremost concerned with helping the poor. What about immigration? This is obviously the divisive issue on which the Catholic Church under Francis and the United States government under President Trump have had the most disagreement.
Yeah, I think it's going to be really interesting because this is not a typical kind of US based Bishop that we're getting as the pope right now. This is a man who's lived all over Latin America. He's done a lot of diplomacy, he's done a lot of church building and bridge building in other places. You heard a lot of that actually in his opening speech about building
bridges and walking together. And I think that he, with his experience, especially in poor areas in Peru, he understands what's going on with migrants and the sort of needs of people who aren't in desperate situations. And so I don't anticipate that he and the current president of this country will be on the same page necessarily when it comes to migration.
What is the significance of a pope born in the United States, the first American born pope, the first US born pope, especially following the first South American pope.
It is wild. None of us thought that this was going to happen. No one that I know in the Catholic universe thought that we would get an American, and so it's pretty crazy to have two Americans, you know,
broadly understood, back to back. I think it signals a kind of move away from a European centered church to a more global reality and so you have this guy who, yes, is from a global superpower, the United States and Chicago a superpower city, but nevertheless is someone who was very immersed in Latin American culture and then in the culture
of the Vatican. So you can see this sort of global preference that the cardinals are starting to show that they want to show that they have an openness to not just a European Church, but really a more global reality.
What's the likelihood that he can heal the rift between the Vatican and American Catholics because it definitely had developed and you mentioned this isn't the typical American cardinal, those who had spoken out openly against Pope Francis. Can he bring the kind of al Smith Catholics back to the church?
I mean, it's my sincere hope that that is the case. The question is can the al Smith Catholics get on board with the papacy. I mean, the whole point of a lot of this sort of disagreement is who is really in charge, who should really set the agenda for
the Roman Catholic Church. And it's important for us, I mean, as Americans, I know, we feel a lot of like patriotism and everything right now, especially because he's an American pope, but he's going to be the pope of the whole global church, and so well, sometimes we can be a little bit shortsighted and think, oh, well, he's not responding to the things that we care about the most. But he is trying to steer this ship that's kind of enormous.
Four billion people. We should remind everyone one point four billion people, right, the longest standing institution in the Western world. And do Catholics believe that the pope, the leader of the church is chosen by divine intervention, that essentially God has picked this pope.
I mean yes, but let me give you a caveat right. God works through human beings. It's not that God whispered the name Prevost in the ear of every cardinal elector, and that's how it happened. Right, It's not Harry Potter. It's very much real life. And so we believe that the God doesn't let the church fall completely into error. That we believe or we trust that God is somehow in control of this church. And that is very much what sort of is we see happening in a conclave.
Nobody knows what goes on inside you sort of really have to trust, and even the men who are in there are in a sense putting their trust in you know, we don't really know how this is going to turn out. We're going to sort of lay it at the feet of God. And that's that's how Catholics think God works in the world.
I was pretty shocked to emerge from a meeting just after noon here in New York and see white smoke up on the Bloomberg television screen, given that the conclave just started yesterday in Vatican City, and you know, yeah, but looking into this a little more, that's not necessarily that unusual, at least in modern times. They're not necessarily going to be holed up for weeks historical context, for just the duration of this conclave. Is it surprising to you or is it pretty quick?
I mean it felt quick, I feel like, because like you, I feel like they just started yesterday and what's the deal. But it's usually four to five ballots, right, That's pretty much what it's taken the last three times, four or five ballots they do. They're very efficient with their voting. I wish I definitely didn't think it was going to be prevost this quickly. So I was in a meeting with a student and I had to sort of break
out and cancel it and move away from it. But yeah, the white smoke came quickly, and it was a surprise that it was prevous. Now I will say this, he is the guy who was advising Pope Francis on who to appoint as bishops, and it's really significant that he is now the new Pope. It tells us that Francis's vision for who should be in leadership in the church, which is like people who were pastors, that's what Francis
really wanted. That this Leo the fourteenth is going to continue that sort of vision.
He actually started off quoting Pope Francis's Easter Sunday.
Words.
Do you expect him to carry on Francis's work not only in terms of, you know, helping poverty, working class, but also in terms of women in the church in leadership, in terms of LGBTQ, bringing a sense of inclusiveness to this Catholic church that traditionally, at least in leadership, only relies on men.
I mean, I hope. So, I don't know. I don't know where he stands on the issue of women. I can only rely on what he said from the balcony, and a lot of that was echoing so much of what Francis was saying. So you heard him hit all the greatest hits. Right. He talked about peace one hundred times. He talked about building bridges one hundred times. He talked
about walking together to the Promised Land. He kept saying tutti tuti, which was like it means everyone, which was a refrain of Francis's He talked about a church that was open to all, that needed to dialogue, that needed to do encounter, and that I think signals that he wants to continue the legacy of Francis. Now as for the specifics, right, will he continue to appoint women to decision making positions in the Vatican? I hope. So that's
not some toothpaste. I think that I'll go back into the tube very easily, but you won't know.
Right.
This is again where Catholics are like, come, Holy Spirit, let's do this.
Professor, really appreciate you joining us on Bloomberg Business Week Daily this afternoon. Professor Natalia Imparatory, Professor and Chair of Religious Studies at Manhattan College.
You're listening to the Bloomberg Business Weekdaily podcast. Catch US live weekday afternoons from two to five pm Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app, or watch US live on YouTube.
Well a hard pivot from Vatican City and from What's going on with the Pope too. The other big story of today, and that of course, has to do with trade. President Trump announced a trade framework with the UK, hailing it is a quote breakthrough that will bring down barriers
and expand market access for American imports. The President said final details of the pact would still be negotiated in the coming weeks, but under the agreement, the UK would fast track American goods through their customs process and reduce barriers on ag, chemical, energy, and industrial exports. Here's what he said a little earlier today.
Both countries have agreed that the economic security is national secured, and we'll be working together as allies to ensure that we have a strong industrial base, appropriate export controls and protections. Were key technologies and industries like steel. Steel is a big factor. Both countries will become stronger with steel.
That was President Trump earlier in the day from the Oval Office for more we bring in Bloomberg News, UK Government porter Joe Mays and Bloomberg Economics and US economist start Paul Joe's in London stored us here in the studio. Joe, I do want to start with you and just can textualize the framework or at least the details with what we know in the framework between what was there before Liberation Day so called Liberation Day, and what is the
status now after this framework was announced. What are the big differences there?
Yes, the context is that the US brought in these quite putative tariffs, particularly on the car sector, steel's aluminium, in excess of twenty five per sent for those industries and that was very damaging to the UK economy. And after the deal today there is relief for those industries. So on cars the tariff going down from twenty seven point five percent to ten percent for a quotch of one hundred thousand vehicles, which the privacy case DALM was
hailing as a victory for companies like Jaguar Landrover. The steel tariff has gone from twenty five percent to zero. Similar for aluminium. So those are the real big tariff wins that the UK wants to talk about But nevertheless there are still these ten percent baseline tariffs on the arrest of goods that the UK tries with the US. So it's still a weaker position for the UK than before Donald Trump became present, but it's better than things
were yesterday. That's how kiss Dalwin was framing it. So it's a limited polisical win for the UK whilst still suffering effectively from the remaining tariffs.
What about US access to the UK market? And one of the things Donald Trump has talked about for a long time is that, you know, Europeans and I suppose he includes the Brits in that don't buy American products, and of course he's talking about cars. Is the UK market going to be far more open to US goods than it was before this agreements?
There was included in this agreement provisions to liberalize access to UK market for food products for example, for example, beef exports can now come into the UK from the US and why they couldn't before.
So that was hell as.
A victory by President Trump. A tariff on ethanol exports in the UK they're also now being removed, So yes, there was a liberalization here. It wasn't an enormous liberalization that, for example, on food standards, the UK is still saying that it won't, for example, accept hormone treated beef into Britain. So that's a a kind of limitation on that liberalization, but still extreme limitation.
Thanks Start, Yeah, I want to bring Start Paul in a Bloomberg Economics he joined us here in the Bloomberg Business Week studio. Equity markets certainly cheering this, and we should note that the fact that the President did make comments about buying US equities earlier in the day as well when he was in the Oval office earlier. Stuart, what is the view from your per Bloomberg Economics of what this means for the US and sort of how it could illuminate maybe a framework moving forward for deals.
Just we know that we're on a de escalatory path. This concretizes some of it. It gives some sort of shape to what we could expect from deals going forward. It might be a piecemeal approach, and this can be something that takes a long time to develop. As we heard from Secretary Bessant, there are seventeen key trading partners that the US is approaching deals with. If they all take this shape, They're all going to have a relatively dull sort of impact on US economic activity. What will
really shift most is sentiment around US engagement in the world. So, just recognizing that we're on this sort of de escalatory trend and that there's not going to be just a full retreat from the global stage.
What would be the best for US economic activity? I mean, it doesn't seem like the President's going to lower at least the baseline tariffs billow ten percent for any country, won't do it for the UK.
Yeah, So even if he doesn't lower the baseline tariff, creating enough car vouds does open up, so it does sort of generate additional economic activity, and it brings the average effective tarif rate significantly below what that ten percent baseline is. So if we think about what the average effective tarif rate was on the UK, it was just a touch above ten percent. Now with these carveouts, the average effective tarifrate in the UK drops down to about
seven percent. So what does that means, Let's say for the UK in terms of economic activity and growth, where there was about about thirty basis points of drag on real GDP growth for the UK, now it'll just be about twenty basis points of drag, so that'll keep GDP growth just a touch under one percent for the full year. That's that's according to our UK forecast.
Hey, Joe, on that point, based on your reporting and what you've learned about this deal, does it seem like it's a better deal for the US, it's a better deal for the UK? Or are they kind of when's the table here?
Is it?
When?
When?
Yeah?
I mean it feels like a better deal for the US if your reference point is the day Donal Trump becomes president, because compared to that day, the US has gained a fair amounts here agriculture access for many products, the ethne thing I mentioned, and still has these ten per cent tariffs on the UK, and the UK is in damaged limitation mode with this deal, so better than yesterday, but clearly not as good as it was when Don
Trump first became president. So yeah, I think it's the US is I think coming out of this slightly stronger or the UK also is trying to claim that the wins are on their side.
As we mentioned, Joe, this is a framework right now. Some of the details continue the need to be hashed out in the coming weeks. What questions do you have, like what's the fine print here that we don't really know yet.
So the UK said that this for them is really a starting point. If anything, there's still much more to happen when it comes to negotiations. That are things like the digital services tax, which the US wants to see regime used. It's dislikes by the likes of Facebook, Google, the evil musk Rey dislikes that tax. That could form part of a digital agreement that's still to be negotiated. The UK has said there's also other tariff lines which the UK would like to see removed, but that subject
further negotiation. The pharmaceutical sector, for example, very important to the UK. There wasn't explicit reference to that in the agreement today, so what happens there on tariff So there's still much more to come bent President Trump was trying to say this is full comprehensive, We've maxed it out, and the UK was saying, well, actually there's a lot we still wanted to talk about here, but you know, we'll play nicely for today.
Joe, I wonder about the the importance of automotive to the UK economy. It's been become clear. I think to a lot of people over the past few weeks, certainly since April second, that global trade is car trade?
Really?
How big is it in the UK, especially when you're just looking at exports to the US, right, because I only can think of very high end you know, Gordon Murray Automobiles, McMurtry, McLaren, Range, Rover, Rolls, Royce Bentley. It's not the mass production vehicles as Tim was mentioning, like Toyota and Nissan. Even though you make them there, you don't make them there for our market.
Yeah, that's right. It's premium cars that the UK tends to sell into the US, and exports of UK cars the US were about one hundred thousand of the last counts, which is basically covered by this quota that's been announced today, one hundred thousand quota at ten percent. So you can
see why the UK is happy with that arrangement. I think the UK carnistry has been broadly speaking, in decline in recent decades, but nevertheless it has carved out this niche in high end luxury vehicles and the US worst important market. So there's a kind of symbolic win here for the UK. It won't have massive impacts on the UK comedy Ritt large. It's still a very small part
of the UK comedy. But nevertheless it's a kind of nice symbolic political win for Kirstamer to say, look, I have masage to reduce these tarers and he was saying today this preserves jobs across the UK, so that's something to be celebrated.
We're having this conversation, Stuart, in context of a United States that has essentially said now is the time to come and negotiate. We know that the Treasury Secretary is headed to Switzerland this weekend to meet with representatives from the Chinese government. We're not talking about China here, though. Does any of this matter without a deal with China?
China, of course matters. Most accounts for about what fourteen to fifteen percent of our total imports were running a trade surplus with the UK. It really doesn't matter a ton to the US if the average effective tariff rate on UK goods is somewhat higher. Once you start creating carve outs for things like pharmaceuticals and everything else under the sun, we're gonna drop from probably a current effective tarifrate of seven percent on UK imports to something closer
to three percent. Not really material. What I do think is the most material is this idea that when Trump took office, the outward expression was one of an interest in withdrawing from the global stage. Now directionally we're moving in the opposite direction. We have had public statements from folks like Besant and everybody else saying that one hundred and forty five percent effective rate on China is not something that sustainable or that can stay, that can remain
in perpetuity. And so again the direction is towards de escalation, and I think that that's what matters most. This is not going to be just the complete crackup of the global commercial order that was threatened. There will be a turning of the tide, in a bit of a shifting. But we knew that that was going to be the case, with friend shoring and on shoring as opposed to you know, retaliatory or reciprocal tariffs being the terminology of the day.
We knew this was going to be the direction under Trump.
By the way, I forgot to.
I forgot to tell everyone Happy v Day because it is May eighth, right, It's victory in Europe Day. Joe, Happy ve Day. Well, what do we know about the European Union? I mean, the US UK agreement has been the main headline, but we've got another flurry of trade headlines with golf, sovereign wealth funds, with a critical minerals deal in Ukraine, and the EU talking about tariffs on ninety five billion dollars of US exports. What do we know about the EU deal?
And what we know is that clearly it's a big priority for both sides to get some kind of agreement done. And we're all kind of reading the tea leaves today on the UK agreement to say, Okay, clearly the US is willing to do this entree, so might they be willing for the same on the EU. But clearly it's different when it comes to the scope of those kinds of deals. Obviously much larger economies, much more trade at stake. It's really a watching brief at this point, trying to see,
you know, will there be movement in these coming weeks. Clearly, as we've just been discussing, the direction of travel from the US side is towards wanting that engagement. But the EU, we know, strikes very hard bargains. These negotiations, and it is unlikely to kind of concede too much in those kinds of talks. So, yeah, it's still a watching brief, Joe.
A lot of questions about this status of American beef going to the UK. What can you tell us just about American agriculture and access to the UK market and how that could potentially change under this framework.
Yeah, so this has been one of the biggest sticking points in the UK US trade talks historically. It's one of the reasons why it's been difficult to get a kind of big, comprehensive free trade agreement in recent years. And what's happened here is that the UK has said, yes, we will allow for the import of US beef, but
on the condition that it reaches UK food standards. Now, those food standards are standards that the US has long criticized has been a scientific and unnecessary, but in the UK they are seen as exceptionally politically important, and we're talking here about things like hormone traded beef, hormone treated beef. And indeed, for the UK it's for important to maintain their standards if they want to deal with the EU, because the EU is particularly hot on having those standards upheld.
So what the UK is done here is can walk that tightrope and kept open the option for deals with the EU by keeping that restriction in place. Benethless, given the US a win by saying you can import some beef into the UK now which tariffs and so on under a quota, but just not hormone treated beef. So you can see why it's kind of a halfway house.
I want to give Stewart the last word. One of the reasons we love getting you on, Stuart is because you're able to make these quick calculations about economic impact of certain events. And I'm going to put you on the spot here and just give us your view on the pope and what it means for the US economy that he is actually the first US born pope to lead the Catholic Church. Do we have numbers here, sure?
So what really matters is if he's going to come and visit the United States. Right, famously, post Francis wouldn't really return to Argentina. But if we were to see now Pope Leo the fourteenth coming to the United States, it could mean a material increase in spending. If we're just extrapolating based on the economic activity boost from let's say Francis's visit to Philadelphia or Soul in twenty fourteen and fifty, and just adjusting for inflation and accounting for
what the impact to be. If the Pope visited, say Chicago, his hometown, you could expect about a billion dollars an additional economic activity. That's about five basis points of additional spending growth in any given month. A four city tour or five city tour like that is a pretty big papal pop in economic activity from a tour coming from the pope.
Okay, so maybe not Taylor Swift, maybe not Beyonce, but the Pope certainly a huge economic impact.
If he does a whole tour, it would be a different story, right. He wouldn't likely just go to Chicago. He would bring over the his whole entourage, probably at least one Pope mobile. So I imagine he would go you know, New York, DC, Chicago.
Yeah, I mean the travel expenses, the security expenses for each city visit, that's probably close to about fifty million dollars. But yeah, this is not quite Taylor Swift, but they're still talking about filling Wrigley feel. Yeah, it's a a good amount of economic activity that generated.
All right, well, a big thank you to both of you who covered a lot here. We went around the world. Joe mays Our, Bloomberg News UK Government reporter, joining us from London. Bloomberg Economics US economists store Paul.
Here.
You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from two to five East. During this listen on Applecarplay and Android Auto with the Bloomberg Business app, or watch us live on YouTube.
I'm Carol Massard. We're at the Principal Asset real Estate conference here in Pleasant Valley, Arizona. We're going to continue our coverage here. I want to throw out one little stat as we continue. Nearly half of family offices say they plan to increase allocations to real estate in the coming months, with an emphasis on residential industrial sectors. This is according to some research out from night Frank, So let's get to it. I'm curious what rich Hill has
to say about it. He's Senior managing director, Global head of real Estate Research and Strategy at Principal Asset Management. Here at the conference in Arizona, rich. Good to have you here with us. How are you.
I'm great, Thanks for having me on today.
It's great to have you here. I love folks who have seen some different cycles. How do you make sense of this cycle right now?
Hey?
Look, every cycle's different.
I like to begin by saying commercial real estate valuations are down more than twenty percent from their peak in twenty twenty two. That's a generational decline in private real estate valuations. We've only seen that two times before and aftermath of the Great Financial Crisis and in the early nineteen nineties post this SNEL crisis. So heading into this year, commercial real estate valuations felt like they were on pretty
good footing. Then April came and tear us through a little wrench in that equation, leading to some questions amongst investors.
Well, it's interesting too when I think about miss priced assets, So how mispriced are they then today in terms of lower too low in terms of valuation, Which are some assets that maybe still need a little bit of work here?
Yeah? Great, that is a really interesting question because as you think about what's miss priced, you can think about that on absolute basis or a relative basis, where we think about assets that are mispriced. It's that are actually going to grow very strongly over the next three, five
or ten years. Those are, in many cases alternative sectors that many people don't think are what could be considered traditional commercial real estate asset classes, right, things like data centers, right, or cell dours or seniors housing or single family rentals. These were asset classes that didn't exist in the commercial real estate sector twenty years ago, but are now a big portion of the commercial real estate market.
Yeah.
I love that you go there. There's also variations I'm assuming in terms of geography, right, when you look at what's miss priced what's not for sure?
As we think about what has done really well over the past five years, it's been driven by population migrations, right, So many of the Sun Belt markets boomed in valuations, and you're beginning to see some actual growing pains in the Sun Belt market.
You know.
One of the things I love that you said longevity. Deborah Cafaro Aventis was on this panel I did at Milkin and just you know, she's been you know, obviously when it comes to senior living centers, obviously the healthcare sign of it, but that longevity play, especially when it comes to real estate. That's one that's going to stick with us for a while.
It is.
What I don't think a lot of people may understand is that the aging demographic has lived in their houses for longer periods of time. That's actually created some structural and balances in.
The single family home market.
But we think this aging demographic will ultimately move into seniors housing, whether it be limited service senior housing, all sorts of different seniors housing, and this is going to be a long term structural shift that's here to stay.
That's a global That is a global trend. It is, it's not specific in terms of different markets. One of the things I wanted to say, I mean, looking at how US reads are performing as a group, they're up about one percent year to date. They've bounced back along with the rest of the US market. They're nearly up twelve percent since early April. You look at European reads,
they've bounced nearly seventeen percents since then. What does the trend tell you about investor sentiment and the willingness to maybe go back into the market. Is it just the overall okay bounce back or is it something more substantial.
We think it's something much more substantial.
Reads.
While they've had good years in the past couple of years, on an absolute basis, they haven't been a favorite sector in the S and P five hundred or the global stock market. But we think the listed public markets are a leading indicator on both downturns and recoveries. So the public markets are sending a signal that commercial real estate might be a relative winner in this new backdrop of higher interest rates and higher inflation. It's a really fascinating
topic that I don't think is getting enough attention. List reads in the United States. Real estate in the United States, that's the fourth best sector of the S and P five hundred. Despite all the headlines you see about what's happening with tariffs, what's happening with growth, what's happening with interest rates, the public markets are telling you that you should be focusing on the commercial real.
Lill how do you make sense of that in terms of a higher for maybe longer rate environment. Certainly in the United States, it's not fair to say, I mean the ECB we saw, you know, certainly has been cutting rates. Was at the Bank of England cut it. It's not all the same rate strategy when it comes to global central banks, how do you make sense of that? Though in the United States.
I'm often asked, what do I think about this new normal environment of higher inflation and higher interest rates? I reject the premise of the question. What was abnormal was the last ten years of low interest rates and low inflation. Commercial real estate actually doesn't do that well in that environment, at least on a relative basis. Where commercial real estate actually does well is what happened prior to the GFC.
A higherst higher inflation regime exlicit for decades, and that's actually fairly accommodative for commercial real estate because guess what, it's a growth sector.
What about office? I just want to go there. I feel like we've been talking about it since the pandemic. Here we are, what five years out, and I don't know whether the big shoe has yet to drop expectations in terms of that within the real estate sector.
If you're going to ask me, is office going to be an attractive sector over the next ten years or beyond, yeah, I have to tell you yes, it's going to be. Why, there's a couple different reasons. First of all, last cycles winners are rarely next cycles winners. Office properties have been beaten down so much and they're redlined by much of the investor race right now, right that they're beginning to screen at an attract evaluation, especially for the high quality,
well positioned properties. I would consider myself office curious right now. I think it is an attractive asset class over the medium.
To long term.
The signal that you should be looking for is an opening up of lending to the office sector, and I think we're in the cusp of seeing that in twenty twenty.
Five, coming from the private markets more so than the big banks.
That is correct, people like Prince Alassat Management. One of the themes that we heard on our panel earlier today is well, is there an opportunity to begin lending on high quality office at a reset lower basis. I think that might make a lot of sense.
I am curious. You know, as you guys have conversations here at the conference, You've got some really big clients, big investors here, what is top of mind for them when it comes to real estate? And I hate to keep putting it all into one bucket, because it's, as we know, there's different verticals, there's different geographies, and I think it's an important distinction, but I am curious what they're asking you.
Yeah, what's happened over the past twenty thirty years is that commercial real estate has benefited from a secular decline in tenure treasure rates. Right, borrowers have been or investors have been able to refinance and lower lower interest rates, which has helped valuations. I think a really big theme coming out of this conference is back to basics, what property type and what market will drive long term growth.
That's really refreshing to me because financial engineering has driven returns for the past decades, so rightkaid, Plus we're now getting back to all right, fine, what property type do I think I'm going to get three percent net operating income growth revenue minus expenses?
Right?
Where can I.
Actually generate the high attractive unlevered IRRs. You actually don't need that much growth relative to history to get there. So I think there's a lot of investors acutely focused on what property types and what markets to buy.
Which it's more like being back to normal, right. I mean, well, I know everybody kind of forgets that what we saw for such a long time where there was basically no cost to money. Right, that was the unusual point.
Called back to the future, call it back to normal, whatever you want to. This is a really refreshing environment where you can actually block and tackle if you will.
I want to ask you variations US, Europe, Asian, Middle East, you know, the supply chain as it moves around geographies that maybe didn't get a lot of attention that are now getting attention. Like I keep bringing up this idea that Disney's not going to build a theme park in the Middle East. You know, I talked to a lot of folks at Milkin who were like, we opened up
in an office somewhere in the Middle East. So I am curious when you look around the world, you know, where is it all of a sudden getting a lot of investor intention when it comes to the real estate play.
We think one of the most significant trends of the next five to ten years might be the European continent and specifically Europe. Yeah, and specifically building logistics on the European continent. Why is that the case, Well, the European countries might have to trade more with each other, and most warehouse facilities on the European continent are actually relatively old, call it ten fifteen, twenty years old, right, That does not accommodate new modern trade.
So to be able to build new.
Logistics facilities on the continent could be a really interesting theme that's coming out of the next evolution of where we go post era?
Does that also include ports like ports all of a sudden, Like one of the things that came out of the discussions at Milkin too is like that West coast port one of you know that maybe it'll be busy, but maybe not as busy as it used to be. So I'm just curious when you think about that as well, the infrastructure build for that.
Absolutely you have to find these right ports on the European continent and maybe even the UK that will change the shipment of goods. Maybe in the US. One of the ports that I think is most interesting in Savannah. Just to sort of levey off of what you were talking.
About, We've got a lot of family down in South Carolinina, not Savannah, But nonetheless there's so much activity just to wrap up here. Where do you think is the biggest opportunity when you look out Again, real estate's a longer term play, so I think it's either three, five, ten years, where do you think will really present some really unique opportunities for investors.
Yeah, so I'd just conclude commercial real estate is actually eighteen different sectors that fall under a broad umbrella. They were always opportunities someplace in the world for some property type. I do think European logistics is a really big opportunity. We think senior's housing is a really big.
Opportunity globally, right globally.
One of the themes that I've been really surprised about to hear because it's a relatively nichee sector, but levers off of senior's housing is medical office buildings. I've been hearing a lot of investors talk about medical office buildings. So there's going to be some really interesting opportunities that come out from the shakeup. And I'll come back to
the question you asked about office. I'd be remiss if I said over the next ten or twenty years, it sort of feels like it's ready for a rebound.
At some point, people are actually going back to the office, aren't they.
My train into New York City is at ninety seven percent of capacity.
It's happening. It's happening, really great stuff. Thank you so much.
It's great meeting you. Yeah. Same.
Here. Rich Hill, Senior Managing Director, Global ahead of real Estate Research and Strategy at Principal Asset Management. Here at the Principal of Real Estate Conference.
You're listening to the Bloomberg Business Weekdaily Podcast. Catch us live weekday afternoons from two to five pm Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app, or watch us live on YouTube.
Jim's back in New York. I'm here in Arizona, and I'm here at the Principal real Estate conference that's been underway. I want to jump right in and get to our
next guest's Kamal Bati's President CEO of Principal Asset Management. Kamal, it's been really fun talking with your team because I think, amid uncertainty volatility, you know, when you think about some of these asset classes, like real estate, investors are in it for the long term, so there is a sense of calm and understanding that we're going to go through cycles. Talk to us a little bit about, you know, your check ins with your team on a regular basis, A mid kind of the backdrop.
That we've had absolutely First of all, Carol, thank you for being here in Arizona. It's it's an honor. You know, real estate is the heart of our business. We have one of the biggest managers in the world, and it's great to have Bloomberg join us at our premier conference, So thank you for that.
Adom Becaus been doing it for a quarter of a century.
We have been we have some experience from market cycles, which which probably matters more than ever before. So to your question, I think, you know, sort of uncertainty seems to be the most commonly used word these days, and I would say probably the world I want to focus on is clarity because as investors, I think that probably
is the more important word to focus on. What you can get clarity on and what you can get clarity on, In fact, one of the things when you really think about long term trends, because there's a lot of short term noise. The two things I think we can have absolute clarity on is the world is aging and there is money in motion in retirement. And I think if you really think about the needs of those investors in retirement, which we are a premier manager, almost three and twenty
billion of our assets in retirement. The needs for those investors are like only getting more important. And if you really bring that act to an investing landscape with what we have noise in the trade, trade wars, de globalization, the one thing that is clear to us is you have to have local knowledge and footprint as you navigate this environment. You can run portfolios just with a US mindset.
You've got to have intelligence on the ground, right if you're trying to do something in Asia, you're trying to do something in Europe. And that's been the key thing that I would tell investors need to focus more and more on local knowledge and clarity on what's happening in the local geographies is going to be way more important than it's.
Been in the part. I think that is so smart because I do think you know, we throw out global real estate said this a couple of times in the conversations today as a bucket, but there's just so many different dices and slicing of it, if you will, in terms of the different types that are out there. You know, one of the things I am also curious, you know, you guys have been doing this for a long time and it just felt so uncomfortable, But you think of
something like the Great Financial Crisis. This is nothing like what we start are the GFC right when it comes to real estate and just in general market volatility.
Correct, correct, And look, you know, I think we've had such ultimate calm on what I would call political policy. You know, we over post GFC, so much of our attention went to fiscal and monetary policy. I would say monetary policy more than anything else, right, And fysical policy comes into work on and off, but it was really monetary policy was the driver of what all investors thought about.
And now I think we are entering an era where I would say political policy and fiscal policy are going to be the driving forces of markets moving forward.
And it's sort of you have to recalibrate your.
Bettering your view.
I think it's a different thing. Okay, I wouldn't call it a better thing. I think we have gotten used to. I go back to this word around clarity. Central bankers became very very good at providing clarity. Yeah, if you look at the history of how ins have reacted, such attention gets paid to interest rates, what central bankers say, and that sort of became the words they chose and how they said. It allowed investors to build a framework
and invest around it. While we can rely on that, it is you can get the same level of clarity from the political policy today, not just in US but across the world, and the fiscal policy is much more in control of government organizations, and so you have to do a lot of individual work and incremental work as an investor if you want to see clarity. And I
think it's going to be good for markets. Why it is going to be good for markets, in my mind is we've had sort of a collective viewpoint where markets are going, and I think there's a bigger dispersion in investors who think where the world is going.
It's interesting that dispersion. I feel like that is a word I'm hearing more and more often in terms of just the variations, and you've really got to kind of do your homework. I want to go back to what you talked a little bit about longevity, retirement, the democratization especially the private market. Is that going to increasingly whether it's exposure to real estate or other important for ultimately folks really hitting their targets when it comes to retirement.
And what do you want to see in terms of policies.
Absolutely great question. So I was just earlier this week at Milkin and that was a big topic.
Yeah, private markets.
Before that, I'm on the ICI board, Carolyn, that has become a topic there. So this notion of retirement and private markets overall is a big topic.
But I would say the three big.
Trends in the retirement space are, in addition to private markets, there is innovation, and innovation is not just investment innovation. There is technological innovation that play a role for these products to deliver their outcome. And then the last piece is I go back to policy. These markets are highly dependent on where regulatory policy evolves, and I would say the retirement investor is absolutely not participating in private markets today.
They're almost like sitting on the sideline stuck because there's no clarity on the regulatory policy front of how they should access is and while there is innovation of how to do it, it is not there yet. Going back to real estate, I would say it is probably the first door you have to enter if you want to allow private markets, and as an investor, it should be really easy to.
Understand why why exactly?
I would say of all the asset classes, real estate is probably the most different from bonds and stocks. You know, people talk about private equity, people talk about private credit. They are different, but they're not that different. Real Estate at the core is different, and so why are we going to do this. It's all about outcomes, So you
want to add things that diversify you further. So real estate a makes the first logical argument, and academic literature even says that you've got to pick the most diversifying asset first, So that one makes sense. Two, it is deeply global, and it is wide and deep realistic exist all across the world.
You know, we have read markets.
And so the second thing you want to have is if you want to do it in retirement portfolios, you want to have public and private proxies for doing something.
Yeah, real estate is one of those asset classes.
You could buy direct or you could do reads, you could buy bonds, or you could do equity. It is a complete three sixty asset class. And at the end of the day, the saverer, which is really mom and pops who are saving for retirement, want to have an asset class that's deep and you can implement your views across the world in.
A good way. That's probably the best reason I would argue, you.
Know, it's funny at Milkin and one of the guests, I said, you know, it's going to be a period where like we don't really care about the public markets anymore, and like they looked at me like I was black.
You know, what are you saying? But it just increasingly the shift private markets has certainly been a topic, as you know it looking for a long time, whether it's real estate like pick your thing, and I just wonder, you know, how are the majority of investors for one cage like your mom and pop, what they are missing out on?
Yeah, so I would say what they're really missing on is having access to all asset classes. And as you said, they're largely in publics. But public will have.
To be the core of the portfolio.
You know, you need to manage liquidity in these portfolios, and it is by far the biggest component of market access today is in public market.
I just got about thirty seconds left here real quickly. Secretary of Besent kicked off Milkin talking about American exceptionalism basically best place for the US. How do you see it? Because you look at real estate from a global perspective.
So here's what I would say, I think just quickly, yes, just quickly, America will remain exceptional in technology. Not sure about every sector of the economy.
All right, you are quick, you know how to take cues. Really really appreciate it. And it feels like a lot more optimism, a lot more open than some of the uncertainty and concerns come out. Perfect way for us to wrap up.
Our coverage today.
Thank you so much for inviting us. Really enjoy the conversations.
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