Critical Section of Real Estate in Focus for Wealth Managers

Summary

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Bloomberg Businessweek — Critical Section of Real Estate in Focus for Wealth Managers

Date: December 10, 2025
Hosts: Carol Massar & Tim Stenovec
Guest: Lauren Hochfelder, Co-CEO of Morgan Stanley Real Estate Investing

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Episode Overview

This episode spotlights the evolving landscape of real estate investing, with a special focus on sectors presenting critical opportunities and challenges for wealth managers. Hosts Carol Massar and Tim Stenovec are joined by Lauren Hochfelder, Co-CEO of Morgan Stanley Real Estate Investing, to discuss market dynamics as 2026 approaches. The conversation zeroes in on the performance and future outlook of various real estate segments, with an in-depth look at the demographic forces reshaping residential and senior housing, and the implications for investors.

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Key Discussion Points & Insights

1. The State of the Real Estate Market (03:04)

• Current Status: The market continues to experience the effects of a prolonged correction, with values having dropped about 25% from their peak over nearly four years.
• Market Sentiment: “We’ve been bouncing around this bottom for quite some time, but it feels like the conditions are on the ground... This could be the transition into a recovery period.” (Lauren Hochfelder, 03:04–03:40)
• Buyers & Sellers: Sellers are growing more motivated, buyers are increasingly interested, and debt markets are wide open—signs of a possible inflection point.

2. Investor Caution & "Liberation Day" (04:08)

• Lack of Investor Activity: Despite declining prices and favorable financing conditions, investor participation remains muted.
• Key Event: “...we were hit with Liberation Day... that created a lot of dislocation in the capital and occupier markets... decision makers pause[d], which hurt industrial real estate in particular. You saw rents trend down for the first time in a very long time.” (Lauren Hochfelder, 04:08–04:53)

3. Diversity Within Real Estate Sectors (05:16)

• Not Monolithic: Real estate is segmented, with Class A offices and data centers showing strength in certain regions, while others lag.
• Undersupplied Sectors: “Residential, broadly speaking, is necessity-based and it is under supplied. As a broad matter, it is a sector we like.” (Lauren Hochfelder, 05:16–05:44)

4. Demographic Shifts Driving Senior Housing (05:44)

• Aging Population: The U.S. population aged 80+ is set to grow by 50% over the next five years.
• Supply-Demand Gap: "We are building about half of what we need," pointing to an acute undersupply in senior housing. (Lauren Hochfelder, 06:03–07:01)
• Wealth Concentration: “Over half of this country’s wealth is concentrated in this age cohort... It tracks as among the most affordable, because this is a cohort that... can afford to pay for this.” (Lauren Hochfelder, 06:03–07:01)

5. Affordability & Social Considerations (07:14)

• Who Can Afford Senior Housing?
  • Private-pay, assisted living generally remains affordable for those who sell homes or draw down savings.
  • “Senior housing tends to be more paid for by savings, whether that’s dividends off your savings or actual drawdown of assets. So I sell my house and that gives me a number of years to afford senior housing.” (Lauren Hochfelder, 07:49–08:19)
• Potential Overbuild?
  • Not everyone in the aging demographic will be able to afford or access higher-end facilities.
  • “There are different segments of senior housing, different price points. The margins are a bit different. So there’s a provision of services. But what I would say is in a way you have a natural hedge because there are health care provisions needed for this population.” (Lauren Hochfelder, 08:42–08:58)

6. Technological Innovation & Efficiency (09:11)

• Bringing Down Costs: Innovations in technology are helping to reduce the cost of providing health care and services, making senior housing more viable—even for those living with family.
  • “We’re seeing the adoption of technological innovation, among other things, to bring down the cost of this provision of services...” (Lauren Hochfelder, 09:11–09:24)

7. Societal Impact & Opportunity Cost (09:24)

• Workforce Participation: “We’re seeing it anecdotally, colleagues who are leaving to actually spend time with their aging parents and take care of aging parents... this is going to hit, and it comes with a financial opportunity cost.” (Carol Massar & Lauren Hochfelder, 09:24–09:41)

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Notable Quotes and Memorable Moments

• On Market Recovery:
  • “Here we sit, real estate values down 25%. This could be the transition into a recovery period.”
    (Lauren Hochfelder, 03:32)
• On Investor Uncertainty:
  • “What do big decision makers do when hit with a lot of uncertainty? They pause.”
    (Lauren Hochfelder, 04:17)
• On Senior Housing as an Investment:
  • “Senior housing is a really high conviction strategy for U.S. 2026.”
    (Lauren Hochfelder, 05:45)
  • “The 80-plus population is expected to grow by 50% over the next five years.”
    (Lauren Hochfelder, 06:05)
• Affordability Discussion:
  • “It tracks as among the most affordable, because this is a cohort that... can afford to pay for this.”
    (Lauren Hochfelder, 07:01)
  • “There are different segments of senior housing, different price points... you have a natural hedge.”
    (Lauren Hochfelder, 08:42–08:58)
• Societal Challenges:
  • “We’re seeing it anecdotally, colleagues who are leaving to actually spend time with their aging parents... this is going to hit, and it comes with a financial opportunity cost.”
    (Carol Massar & Lauren Hochfelder, 09:24–09:41)

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Key Timestamps

• 01:58 — Episode begins with real estate trends: NYC casinos, U.S. energy policy, Hong Kong luxury property.
• 02:29 — Weekly "Women, Money and Power" segment introduction.
• 03:04 — Lauren Hochfelder discusses the market's current state.
• 04:08 — Deep dive into why investors remain on the sidelines.
• 05:16 — Differentiation within real estate; focus on strong and weak subsectors.
• 05:45 — Senior housing called out as a top conviction area.
• 06:03–07:01 — Supply and demographic trends in senior housing.
• 07:14–08:42 — Affordability and segmentation of senior housing.
• 09:11–09:24 — The role of technology in senior care costs.
• 09:24–09:41 — Socioeconomic impacts for families and the workforce.
• 09:49 — Episode closes with a look toward 2026.

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Tone & Takeaways

• Pragmatic: The discussion is analytical yet pragmatic, integrating data, market trends, and firsthand insights.
• Forward-Looking: Hochfelder and the hosts emphasize not just where the market has been, but where it might be heading—especially into 2026.
• Socio-economic Awareness: The episode acknowledges the intersecting financial and social challenges related to senior housing and caregiving.

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This episode provides essential context and expert perspective on the shifting real estate market, with critical insights for wealth managers, investors, and anyone monitoring demographic-driven investment opportunities.

Transcript

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[Tim Stenovec]

Bloomberg Audio Studios Podcasts Radio news.

[Carol Massar]

You're listening to Bloomberg Business Week with.

[Podcast Narrator]

Carol Massar and Tim Stenovec on Bloomberg Radio.

[Tim Stenovec]

All right folks, yeah, casinos coming to New York City, including one by New York Mets owner Steve Cohen. Also recently on the Bloomberg, you saw the Energy Department planning to unwind a Biden era program that promoted zero emissions buildings. And then when it comes to real estate globally, which is something we certainly focus on, a story on a duplex apartment selling Tim for a record price in Hong Kong, 113 million US in the latest sign of the luxury property sector in the city is bouncing back. But if you talk about China, they still have a real estate estate problem.

[Carol Massar]

Yeah, they do. That's fair to say. Real estate top of mind for us always. But especially today in our weekly discussion on Women, Money and Power, where we explore the shifts underway in the world of money and investing and the role women are playing in influencing and investing in those shifts. Back with us is Lauren Hochfelder, co CEO of Morgan Stanley Real Estate Investing got about $54 billion in assets under management. She joins us here in the studio. Welcome back. How are you?

[Lauren Hochfelder]

Thank you. Great to see you.

[Carol Massar]

So it's been a couple of months since we last spoke to you. Go back to August and a lot has happened since Then we've had two rate cuts, another one expected tomorrow. Over that time, how has the real estate landscape changed for you?

[Lauren Hochfelder]

Yeah, so at this point, we're nearly four years into a real estate correction. Since August, I'd say real estate values have really been flatlining. But we look into 2026 and we feel like we're at an inflection point. We've been bouncing around this bottom for quite some time, but it feels like the conditions are on the ground. Sellers are more motivated, buyers are more interested. Right. Debt markets wide open. Lots of things lead us to believe that here we sit, real estate values down 25%. This could be the transition into a recovery period.

[Tim Stenovec]

Lauren, why haven't people been buying? I mean, I was looking at REITs as, as a whole, they're down. No, excuse me. They're up only about 2 1/2% as a group. Data center rates according to our index, down nearly 16% year to date. Office REITs down about 14% year to date. Malls are up about 4% year to date. I just looked at a few different things. But why is it still, as you say, there seems to be a lot of metrics out there that would be supportive of investors coming in, including depressed pricing. Why aren't they?

[Lauren Hochfelder]

So, look, I think if you went back 12 months ago, many of these things were true then, right as we headed into 2025. But what happened as we headed into 2025? We were hit with liberation day. And that created a lot of dislocation in the capital and frankly, a lot of dislocation in the occupier markets because leases tend to be pretty long term decisions for CEOs, CFOs, etc. And what do big decision makers do when hit with a lot of uncertainty? What is my supply chain going to look like, etc. They pause. And so you saw a real pause in decision making, which hurt industrial real estate in particular. You saw rents trend down for the first time in a very long time.

[Carol Massar]

You know, we use the term real estate like it's a monolith, but it's not. I mean, there are so many different sectors within real estate and certainly there are areas of strength. Like at least here in New York City, we know that Class A office buildings, Right. If you don't have one of those, you're kind of out of luck. And also data centers to a certain extent in many parts of the countries. What am I leaving off that list? Like, what is the area of strength right now?

[Lauren Hochfelder]

Sure. Well, look, to decide to determine what type of real estate is going to perform? You have to look at what human beings need, what infrastructure supports our daily lives and I'd say living generally. So residential, broadly speaking is necessity based and it is under supplied. So as a broad matter, it is a sector we like. But let's get more specific. Look at the population of the U.S. what do we know?

[Carol Massar]

We know aging.

[Lauren Hochfelder]

Yes. Senior housing is a really high conviction strategy for U.S. 2026.

[Tim Stenovec]

How?

[Carol Massar]

Well, you're not the first person to sit in that chair and tell us that, you know, senior housing is high conviction. Which leads me to believe that there will be a lot of investment in senior housing. What's the delta between what we need and what we have right now?

[Lauren Hochfelder]

Yeah, it is pretty dramatic. Well, let's look at essentially the 80 plus population is expected to grow by 50% over the next five years. So if we even keep penetration rates the same, meaning, you know, we only have a small, small fraction of that senior population. In senior housing we are under supply. We are building about half of what we need. We actually think there's a case to be made that penetration rates should increase. Because look, it's not only that this is where so much of the population growth is, it's actually where so much of the wealth is concentrated. We know that. Right. Over half of this country's wealth is concentrated in this age cohort. So actually if you look across different residential categories, it tracks as among the most affordable. Because this is a cohort that through the combination of home price appreciation, stock market appreciation, et cetera, can afford to pay for this.

[Tim Stenovec]

Well, that's what I wanted to ask you. When I think about whether it's baby boomers and the whole population that's aging and will need maybe certain types of housing, how much can really afford it? I think we always assume that everybody's going to be able to pay the bill.

[Lauren Hochfelder]

Yes.

[Tim Stenovec]

Is there, I mean, I do wonder about the build out. Like is it too much because not everybody will be able to afford it and whether that means they leave, live with kids or something else. I just wonder how much because this has certainly been an investment play we've talked about for a long time.

[Lauren Hochfelder]

Yeah, no, look, it's a profoundly important question both financially and socially. And I'd say the short answer is for private pay oriented assisted living, broadly speaking. Yes. It tracks as much more affordable relative for more traditional residential. It's paid for by current income.

[IBM/Mint Mobile Advertiser]

Right.

[Lauren Hochfelder]

And we obviously are seeing some inflationary pressures, etc. Senior housing tends to be more paid for by savings, whether that's distribution, you know, dividends off of your savings or actual drawdown of assets. So I sell my house and that gives me a number of years to afford senior housing. And the reality is because you've seen home prices increase so dramatically over the last 30 years that many of these seniors have been in those same homes, they can actually afford it.

[Tim Stenovec]

But is there an assumption of a number that you guys think about, of the aging populate, you know, population, that 50% of them will be able to afford some kind of senior housing? Is it 40%? I'm just curious because I think we make an assumption that everybody who's going to get old is going to be living in, you know, kind of nice assisted living or something. And I don't think that's the case. And I'm just curious about that.

[Lauren Hochfelder]

Yeah, no, no, no.

[Tim Stenovec]

It goes back to the overbuild, you know.

[Lauren Hochfelder]

Yes, well, I think the, I mean, it's obviously there are different segments of senior housing, different price points. Obviously the margins are a bit different. So there's a provision of services. But what I would say is in a way you have a natural hedge because.

There are health care provisions needed for this population. And, and in fact, often staying at home, even if you're leaving with your living with your children, there is a cost to the health care provision there.

[Tim Stenovec]

Right.

[Lauren Hochfelder]

So I think what we're seeing is the adoption of technological innovation, among other things, to bring down the cost of this provision of services that can sometimes be done more efficiently in that form.

[Carol Massar]

We could have an entire discussion on the economics of this. I mean, we're seeing it anecdotally, colleagues who are leaving to actually spend time with their aging parents and take care of aging parents. I mean, this is going to hit leaving a job.

[Tim Stenovec]

Yeah, like this is going to hit their parents in. Yeah, right.

[Lauren Hochfelder]

Which comes with a financial opportunity cost.

[Carol Massar]

Exactly. I mean, the elder millennials and like Gen X really living through this as.

[Tim Stenovec]

We speak, it's, it's unbelievable. Thank you for coming in.

[Lauren Hochfelder]

Thank you so much.

[Tim Stenovec]

Yeah, really interesting. We'll see what 2026 holds for all of us.

[Lauren Hochfelder]

Happy New Year to you as well.

[Tim Stenovec]

Lauren Hochfelder, she's co CEO of Morgan Stanley Real Estate Investing, joining us right here in studio.

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