Real Estate 2026: Positioning For the Next Cyle With Portfolio Manager Brent Jenkins - Compound Insights Recap

Podcast: Compound Insights

Published: 2026-02-16

Duration: 34 min

Summary

Brent Jenkins discusses the unique challenges and opportunities of the current real estate cycle, emphasizing the impact of rising interest rates and the importance of manager selection for investors.

What Happened

In this episode of Compound Insights, host Gary Farber sits down with Brent Jenkins, managing director and portfolio manager for the Clarion Partners Real Estate Income Fund. Jenkins, who has over 30 years in the real estate sector, outlines how this cycle differs from previous ones due to a capital markets dislocation driven by rising interest rates and inflation. Unlike past cycles that were often accompanied by recessions, this environment has led to a reset in real estate values, affecting various industries uniquely. Jenkins notes that the higher borrowing costs have impacted real estate significantly, creating opportunities particularly in debt investing as the market adjusts to the new normal.

Jenkins also reflects on lessons learned from past market cycles, drawing comparisons to the Global Financial Crisis and the recovery that followed. He emphasizes that while each cycle presents unique challenges, experience plays a crucial role in identifying which sectors will recover faster and where the best risk-adjusted values lie. Clarion's long-term investment strategy focuses on core and core-plus strategies, prioritizing income-producing properties while considering global themes that influence investment decisions. As for the future, Jenkins identifies key demographic trends and housing shortages as pivotal themes shaping the real estate landscape leading into 2026.

Key Insights

• Capital markets dislocation has fundamentally altered real estate valuations.
• Higher interest rates are creating new opportunities in debt investing.
• Experience from past cycles is critical for understanding current market dynamics.
• Demographic trends will significantly influence real estate sectors moving forward.

Key Questions Answered

What makes the current real estate cycle different?

Brent Jenkins points out that this cycle is marked by a capital markets dislocation caused by rising interest rates in response to inflation. This situation has led to higher borrowing costs and a reset of real estate values, with different industries being impacted in varied ways. Unlike past cycles that often included recessions, the current one is characterized by these unique dislocations without a recession, which has taken time to adjust.

How have rising interest rates affected real estate investments?

Jenkins explains that the increase in interest rates has created a scarcity of debt capital, which exacerbates the challenges in the real estate market. This environment has made it necessary for investors to adapt their strategies; those who previously focused on equity investments are now finding compelling opportunities in debt investing. The higher rate environment has become somewhat baked into market values, leading to strategic shifts.

What lessons from past market cycles does Jenkins apply today?

Reflecting on past cycles, Jenkins indicates that each situation is unique but emphasizes the importance of experience in recognizing recovery patterns. He cites the Global Financial Crisis as a stark contrast to the current cycle, where recovery was marked by cap rate compression. Clarion Partners leverages its extensive experience to identify sectors with better risk-adjusted values, adapting investment strategies accordingly.

What long-term themes does Jenkins see impacting real estate by 2026?

Jenkins highlights several key themes that will shape the real estate sector, particularly in 2026. He notes the influence of demographics, particularly the wealth creation among millennials and the aging baby boomer population, which will drive demand for housing and related real estate. Additionally, he mentions a housing shortage exacerbated by affordability issues and the ongoing impact of innovation, particularly in e-commerce.

How important is manager selection in today's real estate market?

According to Jenkins, in this environment where not all assets are benefiting equally, manager selection becomes critically important. Investors should seek out managers with extensive experience and expertise in both debt and equity markets. Those who can maintain a long-term focus and navigate volatility effectively will likely perform better in a landscape characterized by heavy risk concentration.