Late-Cycle Real Estate Investment Opportunities for Savvy Investors
Savvy investors can still find opportunities in real estate–including commercial real estate debt, logistics and alternative assets–reported TH Real Estate, New York.
“Solid real estate fundamentals and economic growth suggest the U.S. real estate cycle will last several more years,” said TH Real Estate Managing Director and Head of Americas Research Melissa Reagen. “The U.S. real estate market is in its mature phase as characterized by slowing rent and appreciation growth. However, real estate fundamentals remain solid with supply and demand largely in balance.”
Reagen noted the current economic expansion is on pace to become one of the longest growth periods in U.S. history. “If growth continues through February 2018, the expansion would set a record as the third longest,” she said.
The longest expansion on record lasted 120 months, which would be surpassed in June 2019 if this trend continues. “All current economic signs suggest it is a distinct possibility that the expansion could reach 120-plus months,” Reagen said. “We expect the U.S. real estate cycle to continue into 2018 and beyond given solid real estate fundamentals and economic growth.”
The Think U.S. Cities: Real Estate Investment Opportunities in 2018 report noted this year could be an “opportunistic” time to add CRE debt to a real estate equity or multi-asset portfolio given the abundance of lending opportunities available. “CRE debt enhances portfolio performance due to its modest correlation and higher risk-adjusted returns, relative to most other asset classes,” the report said. “We believe it is the ‘superfood’ every portfolio should consider adding.”
The report predicted the logistics sector will outperform its peers this year as healthy market conditions and continued e-commerce sales growth support higher rents and capital values. Green Street Advisors, Newport Beach, Calif, recently said e-commerce sales have generated an additional 30 to 40 percent in warehouse demand.
TH Real Estate Director of Research and Strategy John Philipchuck noted investors are increasingly diversifying into sectors with “sustainable” demand drivers that provide both stability and growth. He said “alternative” real estate sectors that are underpinned by demographic growth and human need such as self-storage, student and senior housing and medical office offer “resiliency” in periods of economic instability.
