Investors, Brokers, Lenders Expect ‘Rush’ to Place Capital Before Elections

RCM LightBox, Carlsbad, Calif., said commercial real estate investors, brokers and lenders expect a potential surge of activity in first-half 2020 ahead of the upcoming presidential election.

“In the first half of the year, capital will rush to put money to work ahead of the election and before the Fed changes its mind on interest rates,” said K.C. Conway, Chief Economist and Director of Research & Corporate Engagement with the Alabama Center of Real Estate. “The wind is at your back for the first six months.”

The RCM LightBox Investor Sentiment Report found nearly 70 percent of CRE market participants believe this year’s investment activity will equal or exceed last year’s total. Nearly 80 percent said they believe property sale prices will be the same or higher than last year.

The RCM LightBox Investor Sentiment Report also said:

–Lenders are taking a more conservative look at property values, loan-to-value ratios and other underwriting factors to hedge against a slowdown.

–Multifamily and industrial properties will continue to dominate, with further investment targeting vibrant markets experiencing population and business growth.

–E-commerce activity will heighten in markets with two million-plus residents, spurring development and investment tied to last-mile delivery, food products and general consumer goods.

“We’ve reached a point in this current cycle where optimism and discipline continue to prevail and drive investment activity, but not necessarily for everyone,” says RCM LightBox COO Tina Lichens. “Investors expressing a more cautionary tone are not completely pulling back but instead are adapting their investment profile and looking at different markets and risk profiles.”

The top threat to commercial real estate investment, noted by 34 percent of survey respondents, is a change in economic conditions such as interest rates, corporate growth or stock market levels. More than a third noted a potential mid-year “wait and see” market pause due to the election as the top threat.

Nearly 78 percent of survey participants said the availability of capital and the current fundamentals are the biggest activity drivers at the moment. While most respondents expressed considerable optimism about the CRE market, some said they believe a “tap on the brakes” is imminent.