Investors Take On More Risk As Real Estate Cycle Nears Record Run
Current macroeconomic trends coupled with billions of dollars in dry powder waiting to enter the market have pit commercial real estate buyers against sellers.
Property valuations, though cooling, are still hovering near cyclical highs, and buyers are balking at the price tags, taking into account the current length of the cycle, rising interest rates and future exit caps. “The reality is, most of the acquisitions being made are really, in the long run, a losing proposition for the buyers,” Yardi Matrix Director of Research and Publications Jack Kern said. “The sellers are doing really well because they are getting a premium for their properties. Buyers are losing [and] buying something that will not gain a sufficient level of value to provide returns they’re going to need.”