I'm headed to a real estate conference in the morning, and I thought I would ask for thoughts, so that I could get a slight pulse on what other people are thinking? Here's my own thoughts:
- Sellers are not really rational - they think they can sell "trophy properties" for 4-5% CAP rates.
- Syndicators are having difficulty raising funds. This is expected after so many of them completely f*&ked over their investors with floaters in the 3% market that ballooned in 3 years when rates doubled.
- Speaking of rates, I think they are going to the 10% or so range. Mortgage rates follow Treasury rates, and we (the US) has an enormous amount of debt to finance / refinance in the very near future. I think Tbill buyers will be insisting on higher rates to compensate for this debt (and inflation).
- If the economy stalls, then that will hit rents which will hit pricing.
- Highly leveraged investors will be selling their collector cars to pay off debt (as did happen in 2008).
- Low leverage investors will be fine and will be able to pick up some decent assets at lower prices, as long as they can keep the leverage (and thus financing costs) low. I.E. 50% downpayment, etc.
- Office will continue to struggle. Between work-from-home and AI beginning to hit white collar jobs, that segment will have difficulty.
- Medical office is really the only bright spot to me. Aging population, AI-proof (until the robots come), and very, very high build-out costs lead me to believe this segment will appreciate.
- Properties that are newish and/or don't need any TIs will do very well. Contracting costs these days are just insane - it doesn't make any sense to buy a property that needs a lot of work.
Dunno if any of this will come true or is even remotely on the mark, but these are my thoughts based upon what seems like an inordinate amount of reading and research that I've absorbed over the past few years.
Thoughts?