Commercial real estate (CRE) is showing renewed activity after a notable slowdown at the beginning of the year, driven by widespread economic uncertainty. Recent analysis has shown that despite depressed investor sentiment, the underlying property sector fundamentals strength shows through. This resurgence in interest is projected to build steam in the second half of 2023 and beyond.
Her newsletter, CNBC Property Play, tracks the new and developing opportunities for real estate investors who are learning to read this new landscape. Our newsletter has acted as a compass for navigating these investment opportunities with each evolving market phase.
Ben Breslau, chief research officer at JLL, emphasized that despite recent challenges, asset valuations have generally remained stable across various markets. He stated, “With no shortage of liquidity, institutional investors are returning to the market with more capital sources and a renewed appetite for real estate.” Investors continue to find confidence in the real estate sector. This renewed interest isn’t a second too soon, with borrowing costs and property values now beginning to level out.
At the start of this year, commercial real estate activity tempered considerably as an uncertain economic climate fostered hesitancy from investors. The most recent available data indicates that the sector may be on the mend. JLL’s third quarter reports continue to stress that the fundamentals underpinning property performance are solid. This is a sign of things to come as investors begin to follow suit and take a more offensive stance.
Analysts are predicting a slow but steady rebound. They assert that the new commercial real estate environment demands taking on greater risk. The Bid-Ask Spread is the log difference between final winning bids and asking prices. At the same time, Bids per Deal measures the average number of bids per deal, together illustrating how high the competition flame is starting to rise. The Bid Variability index points out the level of price variability in final bids, showing the new market corrections still occurring within the market.
Even as optimism comes back, the retail industry is still a spectrum of pessimism and positivity. The most important thing is it did better than last year. The last few months have been down, mostly because of the continuing tariffs, which are taking money out of consumers’ pockets. Due to this, retail has persisted in suffering, honed, even as other asset classes experience a recovery from the recessive dark days of commercial real estate.
Experts believe CRE investments are still very appealing as a long-term store of value. Whatever the case, investors are showing signs of returning to a more “risk-on” mentality. Add in a favorable debt market and this trend will likely continue to propel growth in capital inflows into the sector.
The fundamental appeal of CRE investments as a long-term store of value is undiminished. As a result, according to an industry insider from Bloxam, investors are moving into a ‘risk-on’ mode. This change in attitude, combined with today’s remarkably robust debt markets, should help spur even more capital flows, resulting in more growth.