Graph: Where Are We in Market Cycle?
Where do you think we are in CRE Market Cycle and which asset classes are opportunity to invest in?
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Your guess is as good as mine. There's still too much up in the air - from a multifamily investment sales point of view in a primary Texas market.
My guess we are in the Fear stage. The smart money sold their multifamily portfolio last year at the peak of the valuations and sitting on cash to pick up the Capitulation stage assets..
Fear! So funny, everyone thought we were in capitulation months ago, it was just the bull trap!
Which asset class have:
(1) the biggest downside potential
(2) resilience
(3) the biggest upside
and why..
I'm obviously biased but for 2) and 3) - luxury hotels. You have your own segment of consumers that have very little price sensitivity. Also cap rates are so much higher than most other asset classes that rising treasuries are much less of a concern. Also your value tracks inflation since you can reset rates at your whim.
For 1) as a shocker to no one most office is toast IMO (aside from CBD class A). Multi also has some scary downside here due to the eroding consumer power and how tight their caps are relative to treasuries.
Totally agreed. Hotels are on the best real estate inflation hedges. Surprisingly, Hotel values have held up thus far, better than multi that's for sure.
I believe institutional multifamily is in the stealth phase. Have explicitly heard from institutions who would rather wait and catch the upswing…it won’t be long. Fundamentals are still strong albeit normalizing. A lot of development of new deals being taken off the table and there is still a major shortage of housing in the country. The debt has been the missing piece but when that becomes more predictable there is going to be a wave. Sellers and buyers continue to move toward each other.
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