This Investment Might Be Too Good To Ignore

Technology is leading financial markets higher, but investors might want to consider alternatives to bolster their portfolios.

The NASDAQ Technology Index was up about 22% through the first three quarters of 2025 and over 100% over the past three years. Innovation and technology will continue to drive economic growth in the years to come, but history tells us that there will be volatility.

Contrast this with commercial real estate (CRE). Through the end of the third quarter, the NCREIF Open End Diversified Core Equity Index, an often referenced CRE price index, was up just 4.5% through the first three quarters of the year and was down 9% over the past three years.

The tech sector may well continue to rise, but the value opportunity in CRE is attractive. The Federal Reserve has been cutting interest rates since September 2024, and 10-year Treasury bonds now stand at 4.1%, nearly the same as in mid-October 2022. In late 2024 CRE transaction volume was the lowest in over a decade, outside of the early COVID-19 shock, and is showing signs of picking up with volume jumping 25% year over year through the third quarter of 2025.

This is important as the market starts to understand where borrowing costs will be, and the view of valuations by buyers and sellers starts to converge.

In the multi-family sector, valuations have softened as fear of overdevelopment pressured many markets, particularly in the Sunbelt regions. However, fundamentals have been resilient. Household formation has continued to grow; coming off years of high levels, development activity has cooled with permits and has started dropping sharply. Inflation has pushed up replacement costs, further slowing development. As a result, rental housing demand remains high with the cost of home ownership out of reach for many.

This sets the stage for an opportunity to acquire high-quality assets below replacement cost. Rebalancing portfolios to out-of-favor asset classes can be a sensible way to hedge the risks of over-valuation. CRE may well make sense for investors.