There are opposing forces at work today. Increased interest rates have impacted all asset classes across the board. Real estate is not immune to those impacts. That said, real estate is uniquely positioned as a potential hedge against inflationary forces. 

What we're seeing is that based on very strong underlying space market fundamentals, we have an ability to grow income. And growing income is our primary countermeasure against any kind of upward pressure in real estate capitalization rates. 

Our ability to do that is further differentiated across property sectors. Property sectors with shorter duration leases, places like housing, self-storage, logistics are particularly effective at hedging those inflationary impacts today. 

Commercial real estate investors have had a front row seat to labor and construction material delays. What used to take nine to 12 months to deliver a new industrial property may now take up to 12, or even 18 months. There can be delays on the front end, in terms of municipalities permitting and entitlements, and significant delays in hard material costs and labor availability. 

What that also means is that it can benefit projects that are already delivered and on the ground. Because with less supply, we're better able to increase rental rates across the market. 

Our real estate research group developed a framework that we utilize and you see expressed across portfolios of principal real estate investors. That framework is based on underlying major thematic trends and secular growth drivers. We use the acronym DIGITAL to describe it-- things like demographics, and information, infrastructure, and technology. 

Utilizing that framework, we then identify the markets, and property sectors poised to benefit from those underlying growth drivers. So you saw us as a firm invest early in places like life science, in housing, and in logistics. 

Logistics has benefited significantly from accelerated demand, as various retailers and other distribution companies work to build an infrastructure to help satisfy e-commerce delivery needs. What digital taught us was to look for growth. So we positioned the portfolio in markets poised to benefit from in-migration, payroll employment, household formation, and wage inflation. 

So for instance, being early in Austin, a market with a heavy concentration of tech and high wage jobs, but also significant benefits in terms of quality of life. On the opposite end of that spectrum, we've seen office, over the course of the last several decades, experience a continuation of a secular decline in absorption. Today, we see that decline in growth is likely to continue as we adopt more hybrid work environments. 

Housing is one of the highest conviction themes in our portfolio today. And we worked to build a very diverse housing portfolio-- affordable and workforce housing, renter by choice, active adult communities, manufactured housing, build for rent, and scattered sites single family. All of these types of rental housing benefit from the same demographic forces at work. 

The US formed 1.2 million new households in 2021, and we're forecasting continued growth in '22, '23, and '24. When you couple that with a structural lack of supply, our nation is estimated to be nearly 4 and 1/2 million units short of housing between both the single family and multifamily markets. Finally, we layer on the challenge of affordability. 

When compared to the end of 2020, today the cost of home ownership is 71% higher for the median existing single family home in the US. What that means is that we have a wealth of households with challenged affordability and a lack of supply, fostering an environment for significant demand in rental housing.