The Role of Research in Investment Strategy

Will McItosh, Ph.D, Global Head of Research at USAA Real Estate Company sat down with us to discuss the role of research in commercial real estate. USAA is a large financial services firm with over $220 billion of assets under management servicing military and their families with 11 million members worldwide. USAA has $12.5 billion allocated to real estate: $3-4 billion from USAA and the remaining from various third parties.


Key Take-Aways

  • As the company expanded to third party management, investors expected the research team to be actively involved and guide the investment strategy. Research reports from vendors are considered, however USAA’s forecast models are developed in-house.
  • USAA utilizes both a top-down and bottom-up approach to their research process, though Will’s passion clearly lies in the latter.
    • The challenge is to define the true competitive submarket, which is not necessarily defined by drive time, zip codes or city boundaries. USAA defines the outer limits of a submarket as the farthest location a tenant would occupy as an alternative to the subject property.
    • Next, they estimate the demand drivers for that specific submarket, e.g. office employment for the office sector, and forecast them, taking supply into consideration (both what is under construction and in permitting)
    • Through this process they are able to forecast rental, vacancy and absorption rates.
  • In the last several years USAA has been net sellers, even though their goal is to reach $25 billion in real estate investments. They are not willing to accomplish this by exposing their investors to unnecessary risks. For them, the fact that it is extremely difficult to identify and transact on true core properties is a great signal to sell.
  • An example of their high risk-adjusted returns is their “super” core fund, which solely invests in buildings with mission-critical, government tenants (FBI, FAA, etc.) with long term leases. This portfolio has averaged 6% – 6.5% cash returns (unlevered) for nearly 10-year treasury risk.
  • Will used a baseball analogy when describing where we are in the current cycle, stating that we are in the 7th inning, with a bit of time left in the game.


Victor Alfonso, USDVictor Alfonso grew up in Los Angeles and received degrees in Economics and Political Science from UC Irvine. He spent 8 years at Westfield and recently joined Brixton Capital as VP Asset Management. Licensed Broker in CA and ICSC member. Victor is an official curator and blogger for MIPIMWorld.


Casey FashouerCasey Fashouer is currently enrolled in the Master of Science in Real Estate of the University of San Diego. Casey is also a contributor and curator for MIPIMWorld.

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