(Bloomberg) — KKR & Co. has a record volume of commercial-property financings lined up, and expects more deals as property prices reset and other lenders pull back amid market volatility.

The investment firm’s pipeline has reached an all-time high of $42 billion, the second such record set this year, according to a Tuesday note by Matt Salem, Joel Traut and Patrick Mattson in KKR’s real estate credit group.

Higher interest rates have weighed on market prices for many types of real estate for the last few years. Meanwhile, tariff concerns since early April have made it harder for landlords to obtain financing, increasing their demand for private credit.

“‘Liberation Day’ brought an unexpected new set of opportunities,” Salem, Traut, and Mattson said in their note. The volatility pushed whole loan spreads wider and brought single-asset single-borrower commercial mortgage-backed securitization to a halt as lenders waited for clarity — creating an opportunity to step in with financing alternatives, they wrote.

Property loans are generally attractive as their collateral-based cash flows and floating-rate nature make them a hedge against inflation, according to KKR. The firm usually provides loans at a ratio of 60% to 70% of the value of the real estate, which they say provides enough equity cushion to get repaid even if there are losses.

Private credit commercial-property loans can offer annual returns in the 12% to 14% range, while also offering less downside risk than equities, added Salem, KKR’s head of real estate credit, in an interview. However, he said KKR remains cautious about the potential effects of tariffs and high inflation.

Both could impact gross domestic product or employment, which could pressure property values. Tariffs could weigh on the values of warehouses in Los Angeles, a major US port city, Salem said as an example.

“The biggest risk right now is in the macro,” said Salem. “Inflation being number one, and then number two, recession risk.”

Looking ahead, KKR expects construction activity to stay muted, partly due to higher labor and materials costs in the US and Europe even before tariffs hit. That helps create a favorable supply-demand ratio that will support asset values. Property values have also become more reasonable generally, providing attractive entry points.

“This private real estate credit strategy is really targeting this opportunity set,” Salem said. “We will be putting in billions of dollars to work over the next few years.”

In February, KKR said it raised more than $850 million for its Opportunistic Real Estate Credit Fund II. The vehicle will back first mortgages secured by high-quality properties in the US and Europe, and also purchase certain tranches of commercial-mortgage backed securities.

With the opportunities in the space, KKR has been hiring professionals to help it evaluate more real estate loans, Salem said, declining to give specifics about staffing plans.

“We have been adding to our team, particularly in Europe,” Salem said.

(Updates last paragraph with comment on staffing. An earlier version of this story corrected the third-to-last paragraph to reflect timing of fundraising)

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