The current state of the commercial real estate market is undoubtedly volatile, but how do investors perceive this situation? In a recent video by Marcus & Millichap, Senior Vice President and National Director of Research and Advisory Services John Chang discussed investor perceptions among other topics.
There are distinct differences in approaches between institutional and private investors. While institutions remain on the sidelines due to concerns about potential distress and falling prices, private investors see an opportunity as they believe that the market has bottomed out or is close enough for deals to make sense. This sentiment varies depending on asset type, location, and other factors. Additionally, larger private investors are taking advantage of this window before institutions re-enter the market in full force.
Another notable trend is that sellers are finally coming to terms with today’s pricing standards. According to Chang, more sellers are now pricing their assets competitively rather than holding out for premium prices. This shift can be attributed partly to banks tightening up on extending performing loans as they work towards clearing maturing debt off their balance sheets.
While there may be some distress present in the market currently compared to pre-pandemic levels according Trep,Cred IQ,and MSCI data analyzed by Chang,the overall level remains relatively low at 3.9%of total dollar sales volume during Q1 2024.This suggests that any impact from distressed properties will likely have a ripple effect rather than causing significant waves throughout commercial real estate pricing already being adjusted accordingly.While it may still take some time before we reach a definitive bottom,it’s important for investors not try timing it perfectly,since such predictions only become clear when looking back after-the-fact.As always,it’s best practice instead,to stay informed through reputable sources like Connect CRE .
