**Who Are the Active CRE Buyers During Economically Volatile Times?**
The current economic and financial landscape continues to present significant volatility, marked by fluctuating stock markets and unusual behavior in the bond markets. In this uncertain climate, the question arises: Who is stepping up as the most active investor in commercial real estate (CRE)?
According to John Chang, Senior Vice President at Marcus & Millichap, CRE remains an attractive investment option during periods of uncertainty. However, the level of activity varies significantly depending on the type of investor.
**Foreign Investors**
Foreign investors have historically made up about 11% of total CRE buyer activity over the past 15 years. Today, however, they’re showing less interest in U.S. real estate assets. Chang noted that, though international capital has typically played an important role, current trends suggest a tapering of foreign investment activity.
**Real Estate Investment Trusts (REITs)**
REITs contribute roughly 13% to the buyer pool, but their activity tends to mirror movements in the stock market. According to Chang, REIT performance has been heavily impacted by recent market volatility, which in turn affects their ability and willingness to invest in CRE during such periods.
**Institutional Investors**
Institutional investors typically make up about 25% of the CRE buyer pool. However, two main factors may reduce their activity during uncertain times:
– They are generally cautious in volatile environments.
– They manage portfolio allocations across various asset classes and frequently rebalance when market conditions shift.
Chang explained that if stocks and bonds decline in value, these investors may sell CRE assets to rebalance their overall portfolio. While this hasn’t yet happened on a broad scale, continued instability in financial markets could prompt it.
**Private Investors**
Private investors are historically the most active group in the market, comprising about 46% of CRE buyers. Notably, during and after the pandemic, their activity increased even further:
– 52% of buyer activity in 2020 and 2021
– 59% in 2022
– 61% in 2023—despite rising interest rates
“In a climate of uncertainty and financial market volatility like we currently face, I suspect private investors will be the most active buyers in the market,” commented Chang.
Even amid challenges, Chang expressed optimism for the sector’s future, adding that “real estate prices have recalibrated since 2022.” Furthermore, strong demographic trends and declining construction levels position commercial real estate to strengthen in the long term.
