Monthly insights: Understanding private real estate investing (June 2026)

Monthly Insights #15, June 2026

In this issue:

• Understanding private real estate investing in 2026
• The strongest sectors in private real estate in 2026
• The four strategies: core, core-plus, value-added, opportunistic
• How Heron approaches private real estate
• Fund facts: 40 years and $300 billion
• Quote of the month: Warren Buffet on fear

Understanding private real estate investing in 2026

After a multi-year downturn, the private real estate market is past the trough in 2026, with values stabilizing and total returns turning positive for six consecutive quarters — but the recovery is selective, and concentrated in a few sectors. 

• According to McKinsey, global real estate deal value reached roughly $873 billion in 2025, up about 12% year over year.
• Specialty property sectors such as data centers, senior and student housing, and flex industrial have been gaining share each year since 2023.
• Data-center deal volumes, in particular, surged 37%, making the sector one of the fastest-growing segments. 
• Financing has also eased: transaction volume has grown year-over-year for five consecutive quarters — the longest stretch since 2022. 
• Overall, private real estate values are still low after a deep correction.

According to a recent Deloitte survey, industry investors are actively allocating into real estate as we speak. The survey found:

• Executives at commercial real estate investment companies are seeing real estate "as a potential safe investment, given its performance during similar periods of uncertainty in the past.” 
• Nearly 75% of respondents still plan to increase their real estate investment over the next 12 to 18 months.
• Most survey respondents are choosing real estate for a potential hedge against inflation (34%), greater diversification with other financial asset types (26%), stability as an asset class (15%), and for potential tax benefits (14%).

The thing to remember in 2026: 

What you own and who manages it is far more important than simply "being in real estate."

The strongest sectors in private real estate in 2026

"Commercial real estate" is not one thing — the averages hide a wide gap between the strongest and weakest property types. So rather than catalog every category, here are the sectors that currently look strongest, and why.

1. Industrial. Warehouses, logistics hubs, last-mile fulfillment, and increasingly data centers have been among the stronger sectors, supported by structural tailwinds in e-commerce, supply-chain reshoring, and demand for computing and AI infrastructure. 
2. Residential. Multifamily apartments plus specialty niches like senior housing, student housing, and affordable housing are supported by demographic fundamentals, including a persistent housing shortage and an aging population that drives steady, needs-based demand. Morgan Stanley noted that, while higher energy costs may pressure margins for senior living operators in the near-term, strong top-line growth driven by the rapid expansion of the baby boomer cohort and continued low supply should support outsized profit growth.
3. Specialty Retail. Retail is more resilient than its headlines suggest. The category is bifurcated: necessity-based, grocery-anchored, and well-located retail has generally held up, while older enclosed malls and weaker locations continue to struggle. Limited new construction has also helped support better-positioned assets.

The four strategies in commercial real estate

Independent of what you own, real estate is also classified by how much risk you take to earn a return. Here are four risk-return profiles:

1. Core is the income end of the spectrum: a stabilized, well-leased property in a major metro, where return comes mostly from rent.
2. Core-plus is core with a modest to-do list — a solid, well-occupied building that may earn a bit more with light upgrades or better leasing.
3. Value-added steps up the risk: buy something with problems (tired finishes, weak management, vacancy), fix it, and aim for most of the return from a gain on sale over a multi-year hold.
4. Opportunistic is the most aggressive: build from the ground up or completely reposition an asset, using the most financial leverage and accepting the most uncertainty, with little or no income along the way, in pursuit of the highest potential return.

How Heron approaches private real estate

A recent Prudential report shows that rising investment in AI and technology is expected to lift productivity — and the stronger corporate profits and household incomes that follow let tenants pay up for higher-quality, better-located space. This reinforces a flight to quality where building and location increasingly drive relative performance. 

That thesis around quality shapes how we select private real estate fund managers: we favor experienced fund managers concentrated in the sectors and high-quality assets best positioned to benefit in the current environment.

Here’s what our strategy looks like in practice:

• We currently focus on core and core-plus strategies. That focus is deliberate: core and core-plus risk-return profiles are oriented toward durable income and lower relative volatility, and we believe that's the right posture for a recovery that is still selective.
• We lean into the stronger sectors. In practice that means concentrating on industrial (logistics, data centers, last-mile fulfillment) and residential (multifamily, senior, and affordable housing). These are areas with comparatively durable fundamentals.
• We partner with experienced managers. Real estate cycles can run 12–15 years, so experience through prior downturns, recoveries, and capital-market resets is an important indicator of a manager’s staying power. Our strategy provides exposure to roughly 80+ underlying assets through three established managers whose teams average decades of experience and collectively manage more than $300 billion in real estate assets. 
• We diversify, and we don't cherry-pick deals. Heron is neither a property owner nor a lender. We invest through diversified fund portfolios rather than individual deals, aiming to reduce single-asset and single-manager risk. We select those funds using our proprietary scoring model and due diligence process.

The result is a single automated portfolio providing you exposure to institutionally managed private real estate with a focus on sectors and strategies we believe are well positioned within the current market environment.

Learn more about Heron’s private real estate strategy at heronfinance.com/private-real-estate. 

Thanks for reading,

Khang Nguyen

Heron Chief Credit Officer

From the Heron Blog

• Q&A: Heron Finance’s private real estate investing strategy
• Staying invested historically drives higher returns

Heron fund facts

Fact: The managers in Heron’s private real estate strategy average 40+ years of experience and collectively manage more than $300 billion in real estate assets.

Why that matters: Real estate cycles can run 12–15 years or longer, so most managers may experience only one cycle. Decades of experience across multiple downturns is exactly who you want underwriting your portfolio, especially when a market is trying to find its footing. Learn about the strategy.

Quote of the month

"Be fearful when others are greedy and greedy only when others are fearful." 

— Warren Buffett

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