Why Commercial Real Estate May Be the Most Compelling Alternative Asset Class Right Now
By Nathan Whigham
Over the past two years, commercial real estate (CRE) has been at the center of turbulence in the alternative investment world. The combination of soaring interest rates, remote work disruption, and credit contraction hit the sector hard. Office assets lost their luster, cap rates ballooned, and transaction volume stalled. For many investors, CRE became synonymous with risk.
But markets are cyclical, and distress often sets the stage for opportunity. As of 2025, a growing cohort of sophisticated investors is rethinking CRE not as the problem child of alternatives, but as the most actionable opportunity in the space.
Why? Because while much of the alternative asset universe is only now starting to face real cracks, CRE has already repriced—and that makes it uniquely positioned for smart capital to step in.
A Fast and Furious Reset
The distress in commercial real estate wasn’t slow or subtle. It was fast, broad, and very public. Following the pandemic-induced demand shifts and a historic surge in interest rates, CRE went through a structural repricing.
Lenders reined in leverage. Refinancing dried up. Office towers emptied out. Even multifamily and industrial—darlings of the pre-2022 cycle—faced valuation cuts as cap rates widened. Suddenly, asset owners were underwater on 2021-vintage deals and equity was wiped out in recap after recap.
But here’s the silver lining: this pain has already worked its way through a large portion of the system. CRE has already experienced a real market-clearing moment. Prices have corrected. Risk has been repriced. Opportunistic capital is returning to the table.
Compare that to other corners of the alternative landscape—where many assets are still marked to outdated valuations, and distress remains unrealized.
Delayed Distress in Other Alternatives
The private credit boom of the past few years may be heading toward its first major test. Loans originated in 2021 and early 2022 were priced during a low-rate, high-growth environment. Today, many of those borrowers are struggling with debt service, and restructuring activity is picking up.
Venture capital faces a similar reckoning. As of 2025, many portfolios are sitting on markdowns, with flat or no exits. Yet fund-level NAVs often lag the reality on the ground. The illusion of stability masks what will likely be a challenging capital raising cycle for many emerging managers.
Even private equity is feeling the squeeze. Dry powder remains high, but deal activity has slowed, and exits are harder to come by. Multiple compression is real, and GPs are grappling with how to return capital on overvalued legacy assets.
Meanwhile, core infrastructure and real assets—long considered safe havens—are seeing pressure due to rising capital costs, permitting delays, and increased political risk. Once stable yield plays are now experiencing volatility.
In short, distress is a lagging condition in many alt strategies, but in CRE, it’s already been priced in.
Real Estate’s Unique Characteristics
Unlike many alternatives, real estate has the benefit of being both a cash-flowing asset and a hard asset. That means it has multiple levers to drive value:
Rental income
Operational improvements
Leverage and recapitalization
Tax efficiency and depreciation
As valuations have reset and interest rates begin to stabilize, real estate investors are seeing cleaner entry points, more conservative underwriting, and genuine upside.
In particular, value-add and opportunistic strategies are gaining traction. Managers are targeting distressed assets, bridge lending opportunities, preferred equity positions, and even direct ownership in mismanaged or over-levered deals. The market is becoming more two-sided again, with willing sellers and data-driven buyers.
Where the Opportunities Are
Not all CRE sectors are created equal. Office remains challenged in many urban cores, but even within that asset class, there are bright spots: life sciences conversions, boutique urban repositioning, and Class A+ assets in high-barrier markets.
Multifamily is seeing renewed interest as rents stabilize and new supply slows. Industrial continues to benefit from supply chain reconfiguration and nearshoring. And hospitality, once thought to be the riskiest play, has roared back with travel and experiential spending returning in force.
Investors are also gravitating toward special situations: distressed debt, note purchases, loan-to-own strategies, and real estate-backed private credit. These strategies provide equity-like upside with credit-like protections.
Geographically, capital is flowing toward the Sun Belt, secondary metros, and regions with demographic tailwinds. Puerto Rico and the U.S. Virgin Islands have even drawn attention from real asset investors looking for tax advantages and yield.
A More Favorable Capital Stack
Another reason CRE is gaining momentum is that the capital stack has become more favorable for new entrants. Debt is more expensive, yes, but it’s also more rational. Banks and private lenders alike have pulled back, opening space for new credit players to step in with well-structured terms.
Preferred equity, mezzanine debt, and bridge loans are all seeing increased demand. For investors who know how to underwrite risk and structure protection, these instruments offer asymmetric return profiles.
Meanwhile, institutional capital—which once crowded into core real estate in gateway markets—is rethinking its approach. Many are shifting to private REITs, club deals, or manager-led co-investments that offer more control and flexibility.
LP Sentiment Is Turning
Perhaps most important, LPs are looking for places to put capital to work. With other alternative strategies entering periods of uncertainty, real estate—particularly at the value-add and distressed end of the spectrum—is starting to look like a contrarian but logical allocation.
Several large pensions, endowments, and sovereign wealth funds have announced renewed interest in CRE, especially in segments that are demonstrably dislocated. Family offices are also re-engaging, attracted by the combination of income, appreciation potential, and tangible asset backing.
There is also a growing movement to pair CRE with impact or ESG mandates, particularly in affordable housing, adaptive reuse, and energy-efficient retrofits.
Risks Still Exist—But They’re Transparent
Of course, commercial real estate still carries risk. Some office markets may never fully recover. Construction costs remain high. And liquidity is still constrained compared to other asset classes.
But in CRE, these risks are known, priced, and often visible in a way that private equity mark-to-model or early-stage venture capital risk is not. That’s what makes CRE so attractive in this phase of the cycle: you can see the cracks, but you can also underwrite through them.
Conclusion: The Contrarian Opportunity
The best opportunities in alternatives often come from sectors others have written off. In 2020, that was credit. In 2021, it was growth equity. In 2025, it may be commercial real estate.
While other strategies brace for valuation resets and LP skepticism, CRE has already gone through the fire. What’s emerging now is a more disciplined, more transparent, and more actionable investment environment—one where smart capital can find attractive risk-adjusted returns.
For allocators and fund managers willing to lean into dislocation, CRE might not just be a comeback story.
It might be the most compelling alternative bet of the next cycle.
Bonus: What to Watch in CRE for 2025–2026
Refinancing Wall: Billions in maturing debt will either force recapitalizations, create buying opportunities for both properties and distressed paper
Sun Belt vs. Gateway Repricing: Diverging performance will shape capital flows.
Return of the Local Developer: Smaller operators with strong local knowledge are regaining an edge.
Private Credit Synergy: CRE-focused credit strategies are offering hybrid returns with downside protection.
New Structures: Look out for interval funds, NAV-based lines, and more co-investment structures appealing to institutional LPs.
CRE is a complex asset class, but for investors willing to do the work, the reward may be found in this moment of recalibration. Distress creates entry points—and right now, CRE is the rare alternative asset where the worst might already be behind us.
Nathan Whigham
Founder and President
EN Capital
EN Capital is a leading capital advisory firm specializing in debt and equity placement and capital stack structuring across multiple industries. The firm actively works on deals across the US, Caribbean and LATAM. EN Capital is led by Nathan Whigham who has been structuring and placing capital since 2006.
