Market dislocation is opening a rare window to invest in high-quality unlisted real estate.
The global macroeconomic landscape has entered a structurally distinct phase, characterised by sticky inflation, evolving regulatory environments, geopolitical tensions and shifting capital flows. In this environment, equities and fixed income have become more positively correlated, prompting investors to seek out tangible, cash-generating assets that offer genuine diversification and inflation protection. The WAM Alternative Assets (ASX: WMA) investment team believes the current cyclical reset in unlisted property provides an exceptional entry point to capture structural alpha in hard assets.
Market dislocations can create some of the most attractive long-term investment opportunities. Australia continues to punch above its weight as a destination for global real estate capital, ranking as the sixth most active commercial real estate investment market and the fourth largest destination for cross-border investment, despite accounting for only around 2% of global GDP (Source: Knight Frank). Following several years of rising interest rates, unlisted property valuations have declined and remain subdued, as shown in the Figure 1 below, even as listed real estate markets rebounded strongly in 2025. This divergence between listed and unlisted real estate performance has historically created attractive entry points for long-term investors.
In Deloitte’s 2026 Commercial Real Estate Outlook, they found that nearly 75% of respondents expect to increase their real estate investment in the next 12-18 months, predominantly to hedge against potential inflation increases, to add portfolio diversification, and reduce volatility in portfolio returns. As such, a key theme we expect for 2026 is a resurgence of opportunities to partner with best-in-class real estate managers who can capitalise on pockets of distress in the real estate space and recapitalise high-quality de-risked real estate assets (Source: Brookfield).
We believe the market is presenting a rare window in which high-quality real estate assets are available at valuations that do not reflect their long-term fundamentals. Historically, the vintage years immediately following a sharp monetary tightening cycle have produced some of the highest-performing cohorts in private real estate history (Source: Cohen & Steers). As large institutional owners face refinancing pressure amid elevated borrowing costs, and as institutional investors rebalance their portfolios in response to recent and persistent market volatility, many real estate owners are increasingly being forced to divest non-core, institutional-grade assets. This creates attractive opportunities for investors with the ability to look beyond short-term volatility and acquire high-quality assets from motivated sellers at depressed prices.
The WAM Alternative Assets investment team specialises in manager selection, aiming to identify the best-in-class managers in the alternatives space. Within real estate, one of the key attributes we seek in managers is the ability to discern between genuine distress and structural obsolescence, where there is a clear opportunity to generate returns through active asset repositioning and operational improvement.
A key example is the investment team’s recent investment in 105 Miller Street, a historic office building in North Sydney, made through investment partner Wentworth Capital, as shown in Figure 2 below. This investment sits within the WAM Alternative Assets Fund and the WAM Real Assets Fund (WRAF). The property, formerly the MLC building in North Sydney, was acquired by Wentworth Capital at a 63% discount to its 2018 sale price of $260m. We have strong conviction in Wentworth’s ability to reposition the building into an A-grade office asset following its refurbishment of the property.
The pricing dislocations occurring today will not last indefinitely. As the market begins to stabilise, the window to acquire premium unlisted real estate at historic discounts to replacement value will inevitably close. Navigating this dynamic environment requires partnerships with highly skilled managers who can generate long-term value from these assets. We believe that now is the time to look through short-term volatility and strategically position portfolios to capture the opportunities emerging in real estate.
