Cyclical Market Peak
Acquisition target selection is ever more critical.
Cap rates and interest rates are at generational lows; The Fed is now raising rates as we near the backend of the business cycle; Oil price volatility is impacting regional demand; technology and demographics are dictating change.
These readings steer many prospective investors to the sidelines and should. Their concerns are reinforced by the prospects of a peak in values and increases in borrowing and operating costs.
With more on-line consumerism, retail real estate owners are clamoring to reposition their properties to be more in line with current expectations.
Office space demand has been impacted where markets are dependent on the energy sector in such states as Texas, Colorado and Oklahoma.
The Millennial’s housing and rental preferences and the Boomer’s retirement and downsizing are impacting the residential markets.
Worst case macro-economic performance scenarios are the hurdles to beat. Real opportunity is recognizable with the strong predictive research.
We start with the obvious to formulate investment strategies with the following considerations in mind. As is the case in all businesses, many roads lead to the same place but there is only one optimal route and much is considered to know it.
- Online consumerism pressures brick and mortar
- Re-tenanting of existing retail asset
- Focus on local rather than national businesses
- Tenant mix optimum
- Divestiture
- Redevelopment
- Alternative distribution systems
- Changing industry demands are the opportunity
- Energy sources and demand
- Office demands reset
- Lease flexibility
- Off balance sheet TI
- Synthetic leases
- Macro-economic considerations
- Domestic tax law changes
- Geopolitical landscape
- Climate change implications
- Cultural shift in priorities
- Age/population change