What’s next for Nuveen’s lending strategy?

Rising rates and risk deepen the firm's multifamily focus, and make it more cautious on the office sector.

Nuveen is bolstering its commercial real estate lending focus on multifamily and industrial opportunities in response to increased rates and heightened risk across the landscape. 

Carly Tripp, global CIO and head of investments for Nuveen Real Estate, tells Real Estate Capital USA that the New York-headquartered asset manager is approaching the office sector carefully because of persistent volatility. Office lending has been further complicated by heightened demand for Class A and trophy assets in premier locales. 

As Nuveen bolsters its real estate portfolio in 2022, value-oriented multifamily and industrial deals sit at the top of the priority list.  

The push is being driven in part by sustained institutional investor demand. According to the firm’s Think Equilibrium Climate of change: 2022 Global Institutional Investor Study released March 24, industrial, residential multifamily and technology real estate are all poised to see more allocations this year.  

In contrast to standard value-add plays, Tripp says the firm is looking for assets where there is a dislocation or lack of care in the property’s operations. She said transactions where Nuveen can easily add initial value with limited capital by engineering operations better command more interest when it comes to sourcing on- and off-market deals. 

Office opportunities 

Tripp says Nuveen’s approach to office lending varies by type and location. The firm is interested in areas with a newer stock of supply, potentially smaller buildings and strong population growth, paired with strong employment growth and corporate relocations. 

Austin and other markets in Texas exemplify those parameters, Tripp says. “In some cases, even when we look to Miami, we are still seeing record pricing levels for office because those markets just do not have the supply to keep up with the demand,” she says. “So, we are definitely still focused on Sunbelt locations.” 

Tripp says Nuveen is angling toward specialty office for lending opportunities, including medical and life science assets as well as smaller, newer vintage creative and open office properties where the transition risk to a carbon net-zero environment is low. She notes the firm aims for offices that are technologically sound with 5G capabilities to reduce the transition and capital risks associated with maintaining a large space.  

“We expect there will be a lot of repositioning of your traditional trophy offices going forward,” Tripp says. 

Nuveen also sees potential opportunities with satellite office set ups, which are gaining some prominence as employees show less desire to commute. While the firm is not allocating toward suburban office locations now, Nuveen is still tracking what a more dispersed US workforce could mean for such ‘hub-and-spoke’ office models. 

Nuveen leans towards Class A assets, if choosing between those and Class B assets, for deal favorability because both office types often need the same number of upgrades and amenities to capture tenant attention. Tripp says the older and poorly located buildings tend to need more capital compared with Class A. 

Greener pipeline 

ESG lending and investing have continued permeating Nuveen’s ongoing strategy. At present, the firm has its net-zero carbon goal set for 2040 and parent company TIAA is aiming to be net zero by 2050. 

Institutional investor allocation priorities are also playing a part in the shift toward ESG investing, especially with more pensions, endowments and foundations looking to address climate change positively in their portfolios. 

“The built world absolutely has an impact on society and definitely has an impact on socio-economic mobility,” Tripp says. “We are trying to build our thesis around how to invest in that going forward to truly create societal change with a focus toward economic mobility.” 

Nuveen notably acquired Greenworks Lending – now rebranded as Nuveen Green Capital – in February 2021 to tap into the C-PACE financing market, which has recently garnered more attention as it has evolved beyond financing small-scale solar power and other energy-efficient related projects.