The commercial real estate market is currently experiencing a significant amount of capital on the sidelines. According to recent estimates, there is approximately $200 billion ready to be invested in CRE assets. However, this number only accounts for institutional investors and does not include private capital which makes up about 40-45% of total investment dollars.
One reason for this large amount of sidelined capital is due to an “expectation gap” among sellers who are still adjusting their pricing expectations from previous years. Additionally, many sellers are not motivated to sell their properties at current prices.
On the other hand, buyers are also hesitant to make purchases due to high prices and low cap rates. However, experts argue that if buyers were aware of potential future rent increases or mortgage rate drops, they would be more willing to invest in properties with negative leverage.
Furthermore, successful investors understand the importance of creating value in commercial real estate investments by identifying potential upside opportunities within a property. These savvy investors are currently taking advantage of market conditions and making deals happen despite the overall hesitation from both buyers and sellers.
In conclusion,the combinationof seller’s expectation gapsand buyer reluctanceto buyare keepinga significantamountof CREcapitalonthe sidelines.However,savvyinvestorswho focusoncreatingvalueinpropertiesarestillabletomake dealsandstayaheadofthemarket.This trendis expectedto continueas long asmarketconditionsremainfavorableforinvestment.
