Five Questions for Allan Swaringen, President and CEO of JLL Income Property Trust

The latest conversation in AltsWire’s “Five Questions for…,” series features Allan Swaringen, president and chief executive officer of JLL Income Property Trust, a daily net asset value, perpetual life real estate investment trust. The REIT is managed by LaSalle Investment Management and sponsored by Jones Lang LaSalle (NYSE: JLL). Swaringen shares his U.S. real estate outlook below, identifying investment opportunities he foresees, as well as discussing the advantages of portfolio diversification and realistic return expectations.

AltsWire: Is it an attractive time to invest in U.S. real estate? Why or why not?

Allan Swaringen: We’re seeing a convergence of tailwinds that we believe create a compelling investment opportunity. The U.S. economy continues to demonstrate resilience with stable GDP growth trajectories. Interest rates are trending lower from their 2022 and 2023 peaks, with more rate reductions anticipated through 2026. This creates a more favorable financing environment relevant to recent elevated periods and should draw out substantial capital currently sitting in money market funds as those returns diminish.

AW: How strong are the underlying property fundamentals across different sectors?

AS: The fundamentals remain strong, creating significant landlord pricing power. Industrial real estate is experiencing compelling conditions with new deliveries at their lowest levels since Q1 2019 and the supply pipeline at its lowest point since 2017. Accompanying this supply trend we expect industrial rent growth to pick back up in the coming years to an above inflationary pace, driven by the limited new supply and recovering demand driven by continued ecommerce growth and onshoring of manufacturing. Multifamily housing additionally benefits from supply constraints, with construction starts projected to fall nearly 70% below 2021 peaks. Healthcare real estate also continues benefiting from demographic tailwinds, with an aging population driving steady demand growth.

AW: What’s the significance of replacement cost advantages in the current market?

AS: This is perhaps the most compelling aspect of the current opportunity. Construction costs have increased dramatically since 2020, with the Turner Construction Cost Index showing costs rising much faster than property values. This creates substantial gaps between building new facilities and acquiring existing properties. Properties acquired below replacement cost have inherent downside protection, create barriers to new supply development, and position investments to benefit as the cycle progresses and property values normalize.

AW: How can real estate serve as a portfolio diversification tool?

AS: Real estate offers genuine portfolio diversification benefits with virtually no correlation to stocks (0.03 correlation over 20 years) and negative correlation to bonds (-0.30). The sector’s 6.3% average annual returns with a 7.4% standard deviation and 0.63 Sharpe ratio over the past 20 years compare favorably to other major asset classes. Additionally, real estate’s inflation protection characteristics have become increasingly valuable, as same-store net operating income growth has historically exceeded inflation, providing purchasing power protection that fixed-income investments typically don’t achieve.

AW: What should investors expect in terms of recovery timeline and potential returns?

AS: While this recovery may follow a more gradual, U-shaped trajectory rather than a sharp V-shaped rebound, the foundational elements are firmly in place for sustained improved performance. Historical analysis shows us that real estate investments made at cyclical lows, particularly when assets trade below replacement cost, tend to generate outsized long-term returns. The recent five-year period ending in 2024 represents the worst real estate performance since the global financial crisis era, and historically these periods have been followed by sustained outperformance. The supply/demand imbalances across key sectors provide multiyear visibility into fundamental improvements, positioning investors for what we anticipate will be a multiyear period of real estate outperformance.

Allan Swaringen is president and chief executive officer of JLL Income Property Trust, a daily net asset value, perpetual life real estate investment trust managed by LaSalle Investment Management and sponsored by Jones Lang LaSalle, or JLL. Swaringen is responsible for all financial, investing and operational functions of the REIT and guides the overall strategic direction of the company. He formerly served as fund manager for the company since its inception in 2004. Swaringen has more than 25 years of experience in the real estate industry, including a variety of leadership and investment management positions with LaSalle and other leading institutions. He holds a Master of Business Administration from the University of Chicago Graduate School of Business and a bachelor’s degree from the University of Illinois.

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