As we head into another election cycle, the turbulence and uncertainty surrounding political transitions are once again putting investors on edge. Historically, election years introduce heightened volatility into financial markets as policy shifts and economic uncertainty cause ripples across industries. For real estate investors, this volatility can make navigating the market particularly tricky. Traditional asset classes like retail and office are falling out of favor, and even once-hot sectors like industrial and multifamily are starting to cool. In contrast, two historically stable real estate sectors—Farm Land and Medical Office—are emerging as safe havens.
Bob Waun, co-founder of Physician Property Partners (PPP) and DIRT Realty, believes that now, more than ever, investors should be focusing on sectors that offer long-term resilience amid the market’s ebbs and flows.
“When political change introduces uncertainty, investors look for safe, stable returns,” Waun says. “Both Farm Land and Medical Office real estate have proven themselves to be recession-resistant, providing security in volatile times.”
Retail and Office: Out of Favor in 2024
The decline of traditional office and retail real estate has been a prominent trend for years, but it has accelerated in the post-pandemic world. Office buildings are particularly under pressure as hybrid work models and remote work continue to reshape the demand for space. CBRE reported that vacancy rates for traditional office spaces hit an alarming 18% in 2023, with major urban markets seeing even higher vacancies. As employers downsize and rethink their real estate needs, investors are growing wary of office assets that once seemed like a cornerstone of commercial real estate.
Retail, too, is facing its own set of challenges. The ongoing rise of e-commerce, compounded by changing consumer habits, has left many brick-and-mortar stores struggling to survive. Vacancy rates for retail properties have climbed, and many investors are moving their money out of this increasingly risky sector.
"Retail and office real estate are out of favor for a reason," says Waun. "Both sectors face structural challenges that aren't going away anytime soon. Savvy investors are turning to more stable, demand-driven asset classes like Farm Land and Medical Office buildings."
Industrial and Multifamily: Cooling Off
Industrial real estate, once a darling of investors driven by the surge in e-commerce and logistics demand, is also showing signs of cooling. After years of record-low vacancy rates and soaring rents, the industrial market is now grappling with oversupply in some regions and slowing demand as companies scale back their logistics expansion. According to Prologis, a leading industrial real estate firm, vacancy rates have inched upward, and rent growth is expected to moderate over the next several years.
Similarly, multifamily properties, which boomed during the housing affordability crisis, are starting to see some headwinds. Rising interest rates, combined with new supply coming online in key markets, have slowed rent growth, particularly in the luxury apartment sector. According to Yardi Matrix, multifamily rent growth decelerated in 2023, and vacancy rates crept up as new units outpaced tenant demand in many metro areas.
As these once-hot sectors begin to cool, the question for investors becomes: Where can we find stable, long-term growth? The answer lies in the unique combination of Farm Land and Medical Office real estate.
Farm Land: A Safe Bet in Uncertain Times
Farm Land has always been one of the most resilient asset classes, offering consistent, long-term returns with minimal volatility. As a tangible asset, land holds intrinsic value, and its ability to produce essential commodities like food makes it a reliable investment, even during economic downturns. According to the U.S. Department of Agriculture, the average value of U.S. farm real estate has increased by nearly 4% annually over the past decade, reflecting the consistent demand for agricultural land.
Additionally, farmland is typically less affected by political and economic cycles compared to other asset classes. While stock markets fluctuate and traditional real estate sectors face headwinds, the need for food production remains steady. Investors in farmland benefit not only from the appreciation of the land itself but also from the income generated by crop production or leasing the land to farmers.
"Farmland is a timeless investment," says Waun. "It doesn’t matter what’s happening in the broader economy—people will always need to eat. That makes farmland one of the safest places to park capital in times of political or economic uncertainty."
Medical Office: A Healthcare Essential
Alongside farmland, Medical Office real estate offers another layer of protection against the volatility of election cycles and broader economic swings. Healthcare is an essential service that remains in high demand, regardless of political changes or market fluctuations. With an aging population and the growing need for outpatient services, medical office buildings (MOBs) have become a critical part of the healthcare infrastructure.
JLL reports that vacancy rates for medical office buildings remain low, averaging around 7% in 2023, compared to much higher vacancy rates in traditional office sectors. Moreover, medical office tenants—often healthcare providers with long-term leases—provide reliable, stable cash flows. These leases are typically structured for 10 to 20 years, giving investors consistent income and reduced risk of tenant turnover.
“Medical office space is uniquely resilient,” Waun explains. “Doctors aren’t going anywhere, and patients still need to visit their healthcare providers in person for most treatments and procedures. The demand for medical office space is only going to grow, making it one of the safest real estate investments you can make.”
Safety in Numbers: The Case for Farm Land and Medical Office
While the broader real estate market may be feeling the strain of rising interest rates and shifting demand, farmland and medical office buildings stand apart as reliable, long-term investments. Both sectors offer steady returns, essential services, and insulation from the political and economic volatility that plagues other asset classes.
A recent RaboResearch report on farmland investment highlighted that U.S. farmland values are expected to grow by another 5% to 7% in the next year, driven by the ongoing need for agricultural production and strong commodity prices. Similarly, Physician Property Partners is betting on continued growth in the medical office sector, with an eye on acquiring key MOB assets in high-demand markets.
"In times of political change, the key is to invest in sectors that are essential and resilient," says Waun. "Farmland and medical office buildings offer exactly that. While retail and office face growing risks, farms and doctors’ offices are a safe bet for any investor looking for stability and long-term growth."
For investors navigating the uncertainty of election cycles and market turbulence, the message is clear: Farm Land and Medical Office real estate offer safe, stable returns in an unpredictable world.
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