C&I Report: The Power of Differentiation in Challenging Times
If we picture the commercial real estate cycle as a clock, the market today would be somewhere between 9 o’clock and high noon—what has been dubbed by some a “post-recovery” investment environment. Previously, this would have been the go-go part of the cycle, with rising rents and occupancy driving increases in asset values, and a multitude of investors competing to fund speculative development and acquire existing properties.
But the mood this time around is much more cautious than in past cycles. The consensus of NAREIM members is that the investment outlook is good—yet, not a slam-dunk. Institutions are more attracted to real estate investments than five years ago, but those wounds have not been forgotten. Vacancy rates have fallen in some markets but remain high elsewhere. Companies aren’t growing their office footprints as they have in past cycles, and many retailers are considering designs for smaller stores, reversing a long-term trend of steadily increasing store sizes.
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