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Fluctuating interest rates and shifting demand are key in today’s commercial real estate market, according to Integra Realty Resources’ latest trends report. The Viewpoint 2025 survey collected insights from nearly 600 valuation advisors across the U.S. and the Caribbean.

Anthony Graziano, CEO of Integra Realty Resources, emphasized that fundamental value is driven by cash flow, prime locations, and realistic tenant demand, not speculation. He urged investors to focus on effective management and sustainable rent levels for long-term value, especially in markets with strong job growth and favorable migration trends.

Private investors are diversifying into alternatives like senior housing, self-storage, build-to-rent single-family homes, and data centers. Graziano also highlighted that the best real estate investments go beyond returns and create lasting community impact. Mixed-use developments, such as Nashville Yards and Richmond’s Diamond District, are reshaping underutilized spaces and meeting market demand.

Regarding national policy, Graziano noted that President Trump’s “America First” approach favors real estate growth, but could disrupt previous policies. This includes a potential shift in the federal workforce’s office occupancy and a rise in domestic production due to reshoring trends.

Retail success hinges on consumer confidence, with potential impacts from tax policies and trade tariffs. Retail spaces focused on essentials, like grocery-anchored centers, are likely to perform better in economic volatility.

Multifamily properties remain steady, but affordability concerns could affect investment, especially in markets with high inventory. Graziano cautioned investors to remain flexible and focus on markets with strong job growth and steady population increases.

 

Source:  CPE

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As 2025 approaches, business leaders are focusing on potential opportunities for the upcoming year. For commercial real estate investors, there is cautious optimism that new prospects will emerge, even though transaction activity has slowed throughout 2024.

According to Ashley Fahey, editor of The National Observer: Real Estate Edition, the national commercial real estate market saw $40.1 billion in transactions during the third quarter of 2024. This marks a decline from $43 billion in Q2 and $44.4 billion in Q3 2023, as reported by Altus Group. While transaction activity has slowed, the pace of this decline has moderated, particularly on a year-over-year basis. Notably, 10 of the 15 property types tracked saw an increase in price per square foot in Q3, including mixed-use, manufacturing, automotive, and office properties.

“Transaction activity effectively begets transaction activity,” explained Cole Perry, associate director of research at Altus Group. “The trend I’m seeing is a continuation of the slowdown. Transaction volume is still down year-over-year, price discovery remains a challenge, but there are signs it’s starting to pick up.”

Perry further noted that the market has entered a “new normal,” where both buyers and sellers are adjusting to a lack of comparable sales. Additionally, industry participants are trying to gauge how the policies of President-elect Donald Trump and a Republican-controlled Congress may impact the economy. While many remain hopeful that the incoming administration will bring deregulation or tax cuts, there are concerns that Trump’s campaign promises on immigration and tariffs could lead to inflation and increased economic uncertainty.

 

Source:  SFBJ

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Despite market fluctuations, many investors and property owners report stable real estate values and rents, with expectations that commercial real estate (CRE) will remain steady for the rest of the year.

A recent survey by Matthews Real Estate Investment Services found that 55% of investors noted unchanged property values in the first half of the year, while 46% reported stable rental rates. Around 30% saw declines in values, with only 2% experiencing significant drops. Conversely, 30% reported increased rents.

These mixed results may be linked to Class A developments in the Sunbelt region, which have driven up average rents but also increased vacancy rates. Half of the investors rated their CRE investments as average, with 33% rating them as good.

Looking ahead, respondents anticipate flat values and transaction volumes, alongside a modest 25-basis-point interest rate cut by year-end. However, many believe that significant transaction activity may not resume until next year.

Concerns remain regarding the retail sector, particularly for restaurants, while multifamily properties are projected to perform best in the latter half of 2024. Investors largely plan to remain cautious due to challenges in finding suitable properties, with some expecting the best buying opportunities to arise in late 2025.

Overall, the primary concern for CRE in the coming months is a potential economic downturn, overshadowing worries about market saturation and interest rate fluctuations.

 

Source:  GlobeSt.

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A building that makes “no sense” to most investors could be a diamond in the rough to another — and knowledge and information is key in the current rising rate environment, according to one industry watcher.

“You can’t add value to bonds — and unless you own a VC firm or you’re Warren Buffett or Elon Musk, you really can’t create value by owning stocks,” says Marcus & Millichap’s John Chang. “Other than owning a company or a franchise, only real estate allows investors to roll up their sleeves, either physically or metaphorically, and create value in an investment.”

And Chang says this happens in one of three ways: repositioning, management, or knowledge.  Repositioning can be as simple as upgrading common areas and as complex as transforming high-rise office towers into apartments (a trend that’s happening at a rapid rate in some major metros).  It can also fall somewhere in between those extremes: think moving a Class C property to Class B or repurposing an outdated shopping mall into a mixed-use asset.

Creating value in management can also run the gamut, Chang says.

“At the simplest level, an investor may see some high value but basic operational things that can be done — perhaps just cleaning up a property, adding professional management and moving the rents to market,” he says. “Something more complex may be re-tenanting a building. An office investor I know bought a very large property with an enormous vacant space. He already had a major tenant lined up so he bought the building, restructured the space a bit and then plugged the new tenant in. Boom: the building went from 25% occupancy to 90% occupancy and the property value changed dramatically.”

Chang also draws on another anecdote, this time in the multifamily space, to illustrate this point further. He says an investor he knows with a great apartment management team bought several small- to mid-sized near the ones he already owns and leveraged that team across multiple units.

And finally, there’s knowledge, which Chang says is “all about finding market inefficiencies and exploiting them.” This could include acquiring assets based on emerging demographics or population migration, or could come on the heels of a major employer changing its HQ location or in advance of a tax or policy change. Chang says there are ample opportunities to “capitalize on information where the pending changes are not baked into an asset’s price.”

Several recent examples bear that out: the global supply chain dilemmas plaguing virtually every sector of the economy have prompted many companies to consider re-shoring or near-shoring to mitigate those types of risks in the future.

“These and more opportunities are out there, and a lot of them will make sense regardless of rising interest rates or other factors affecting the market,” Chang says.

 

Source:  GlobeSt.