In A K-Shaped Economy, It's Less About The Asset Than It Is The Class

The economy has become defined by its divide, with high earners fueling growth while everyone else tightens their budgets, creating what has been dubbed the K-shaped economy. 

Where dollars are going fuels where real estate prices rise, and the economic reality is dictating investment strategies. 

Impacts of the war with Iran, which has already exacerbated inflation as rising oil prices ripple through all sectors of the economy, are expected to linger even if the 60-day peace deal agreed to Wednesday holds.

“Our conviction that the K-shaped economy will accelerate has gone up since the war in Iran started and oil prices have been rising,” said William Pattison, the head of research and strategy for real estate at MetLife Investment Management. “That has mostly affected the types of assets we buy within a property type. It has not been affecting allocations at the property-type level.”

That pivot is reflected in MetLife’s allocation guidance for private capital placement, a frequently updated scorecard most recently published as part of its May U.S. Chartbook. 

MetLife Investment Management, which has $736B in assets under management, including $106B worth of real estate, uses the scorecard to advise clients and inform its portfolio management strategy in the private placement market. 

The split in spending between high earners and everyone else shows up in senior housing, which climbed from second to first over the last year on MetLife’s May rankings. The modest shift is reflective of an ongoing demographic transformation in the U.S. that is broadening demand for senior care services as baby boomers age into the market. 

“Some of the strongest growth across the country is for units that are charging rents above $10K per month, and this is in relatively low-cost locations like Texas and Florida,” Pattison said.

“Seniors housing has been a losing sector for 20 years, and that's largely because the demographics have been negative,” he added. “The Silent Generation is a relatively small generation, and baby boomers are today just entering the 75- or 80-plus age brackets and are generating demand for seniors housing.”

The divide between high net worth spenders and everyone else is most apparent in lodging, Pattison said. His research team splits the lodging sector into nine segments based on quality and has tracked an “almost perfect linear trend” where luxury assets have seen growth in revenue per available room while economy assets have seen declines of around 5%. 

The lodging sector has posted strong returns on public markets in 2026, especially relative to their performance a year ago, but it ranks in the back half of MetLife’s rankings. That’s because the stochastic rankings aren’t a reflection of performance but instead of potential, created by running thousands of simulations of market conditions and ranking asset classes by their probability-weighted return outcomes.  

Cold storage, for example, slipped seven positions to No. 15 over the last year, thanks in part to demand dynamics. Speculative construction in the sector exploded during the pandemic amid a wave of new demand, and around 300 new cold storage operators popped up between 2020 and the end of 2025, according to Newmark. The delivery of those properties has pushed vacancy to a 20-year high.  

“Cold storage, I would say, did take off,” Pattison said. “It was one of the strongest-performing sectors over the last three or four years, although today it's facing a higher construction pipeline, vacancy levels are modestly elevated, and pricing is also remaining aggressive, which is why we're not as focused on it as we were in the past.”

Cold storage is the outlier for industrial assets, which rank relatively high on MetLife’s scorecard and have shown some of the biggest positive momentum swings over the last year. Industrial assets near population centers did slip one spot but now sit in third, just behind net lease retail. 

That asset class, which provides stable returns through lease payments as opposed to the more speculative investments typical to the broader real estate world, was the top-ranking sector a year ago and has held on to its high position because it is ripe for consolidation and institutional investment, Pattison said. 

There is already a wave of M&A happening across the REIT world as private capital — or other public competitors — look to capitalize on what are perceived as discounted valuations with acquisitions. 

“The net lease retail space is a sector that we believe will institutionalize over the next decade,” Pattison said. “It's today largely owned by high net worth individuals, but as technology has allowed institutional investors to enter segments like self-storage and single-family rentals, we believe it will also allow them to start investing in net lease retail.”

Single-family rentals, which weathered an existential threat to their business model over the last year, climbed five spots since 2025, while self-storage slipped five positions after Public Storage struck a $10.5B cash deal to buy its competitor National Storage Affiliates Trust.