February 21, 2020
Commercial real estate investors, brokers and lenders are expecting a potential surge of activity in the first half of 2020, according to the 2020 RCM LightBox Investor Sentiment Report. Report participants cite the intersection of strong market fundamentals, ample investor capital, and the potential for increasing headwinds generated by a slowing economy, the impending presidential election, and other factors.
Nearly 70% of participants believe 2020 investment activity will be the same or higher than in 2019. Almost 80% believe sale prices will also be the same or higher.
“I think in the first half of the year, capital will rush to put money to work ahead of the election and before the Fed changes its mind on interest rates,” says K.C. Conway, CCIM chief economist and director of research & corporate engagement, Alabama Center of Real Estate. “The wind is at your back for the first six months.”
Among the report’s other findings:
• Some investors are moving to stabilized assets for healthy, predictable cash flow
• Multifamily and industrial properties will continue to dominate in markets where population and business growth is vibrant
• E-commerce activity will heighten in markets with two million or more residents, spurring development and investment
“We’ve reached a point in this current cycle, where optimism and discipline continue to prevail and drive investment activity, but not necessarily for everyone,” says Tina Lichens, COO with Carlsbad, CA-based RCM LightBox. “Investors expressing a more cautionary tone aren’t completely pulling back, but instead are adapting their investment profile and looking at different markets and risk profiles.”
While a significant downturn appears unlikely, experts noted that many are taking a more defensive stance in evaluating target markets, identifying assets for acquisitions, and defining underwriting criteria. Given the long expansion cycle, any “slowdown” would likely just tap the brakes, RCM LightBox says.
“If I had to put a word on the coming year in terms of the economy and the market, the word would be deceleration,” says Hugh F. Kelly, CRE special advisor, Fordham University’s Real Estate Institute. “We’ve enjoyed a very long run of expansion, to the point where pricing is very high for most commercial real estate assets. At the very least, we should be focusing on things slowing down in 2020.”
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