18-hour cities are defined as second-tier cities with above-average urban population growth that offer a lower cost of living and lower cost of doing business relative to first-tier or “24-hour” cities. In the U.S., 24-hour cities essentially translates to our gateway cities of Boston, Chicago, Los Angeles, New York, San Francisco and Washington, D.C.
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The U.S. is the world’s largest retail market, accounting for over one fifth of global retail sales according to eMarketer. Despite a public perception that e-commerce will put brick and mortar retail out of business, the sector has a track record of delivering solid returns. In fact, retail real estate is the asset class that has historically commanded the highest price per square foot, by far, of any type of commercial real estate. In this article we will start with an overview of the retail asset class, discuss e-commerce and its effects on the space, review demand drivers and provide tips on understanding retail leases.
You see the term "Value add" often applied to commercial real estate assets. In fact, many offerings on the CrowdStreet Marketplace carry this tag. But what does this term really mean? Investors often ask me, “Can operators truly add value or are they simply riding the upswing of a real estate cycle to generate profits?” While cyclical effects can provide wind at the back of an operator it is, indeed, possible to create real value in CRE assets. In certain instances, the potential to create or “add” value is substantial. In this article, we explain how commercial real estate operators can potentially create value in commercial real estate assets and provide an illustrative example as well as a case study.
The assumption that the path to high realized portfolio returns is simply the sum of a series of high individual targeted returns is a recipe for disaster. Despite this, it is tempting for investors to take information at face value. This is why it is common for less sophisticated investors to fall prey to what I refer to as the “Returns Fallacy”. In this article we describe the Returns Fallacy and describe techniques investors can use to improve their realized investment returns.
Non-traded REITs have come under fire recently for high fee structures and front-end loads that have sometimes exceeded 10-20%. However, if these high fees are removed, the Non-Traded REIT investment structure itself may provide significant potential benefits to investors. In this article we highlight the potential investor benefits of the “next generation” of low-fee, non-traded REITs.
Investors often approach a deal with the same fundamental question – what’s the bottom line return? Yet the answer to that question is not always simple. There are different metrics that paint a picture as it relates to: 1) exactly how much will an investment pay out; and 2) when an investor is likely to see all or part of that return in their hands. While we published an article earlier this year on the definition of cash-on-cash returns, we now take the next step. In this article, we begin by revisiting the definition but then move on to highlight the differences between cash-on-cash yields and cash distribution yields.
A commercial real estate transactions is a complex, multi-step process. The benefits to investors of understanding the commercial real estate transaction process are 1) understanding the level of uncertainty at each phase of the transaction process and how execution risk diminishes over time 2) learning to better discern sponsors’ expertise and 3) gaining an appreciation for the amount of work involved for sponsors to bring deals to investors. In this article, we kick off the first of a three-part series on the commercial real estate transaction. Part I will cover the steps from developing an investment thesis to acquisition award (or “winning” the deal).
Oakland’s Uptown neighborhood is in the midst of an major urban renaissance. Capitalizing on an amazing Bay Area location with mid-20th century roots as a shopping and entertainment destination, Uptown Oakland is rapidly refashioning itself into a vibrant “live, work, play” environment replete with great food, jobs, and an arts & culture scene. This renaissance has positioned it in 2016 as, arguably, the hottest neighborhood in the entire Bay Area. From a real estate perspective, this transformation – along with a growing population of Millennials – has landed Uptown firmly on the radar of office users and real estate investors. In this article we highlight the many catalysts driving Oakland’s recent emergence, assess Oakland’s investment opportunities particularly across the Office property class, and provide details on how investors can capitalize on this generational urban renaissance.
Self-storage is a unique asset class. It has a reputation of providing relatively high yields and has also been potentially resistant to recessions due to its lower declines and default ratios vis-à-vis other asset classes. Based on our research, publicly traded self-storage REITs have been one of the top performing sectors in recent years with a good track record of delivering potential dividends and stock appreciation. In fact, our research indicates that the industry has been considered by Wall Street analysts to be “recession resistant” based on its performance during the last economic recession. In this article, we will provide an asset class overview, highlight recent changes in use and conclude with thoughts on how to use this information to make informed self- storage investment decisions.
Commercial real estate investments are subject to shifts in supply and demand that can have a notable impact on net operating income, profitability and yield. Hospitality is one of the few property types where such shifts are felt almost immediately. However, in exchange for a transient customer base that is not obligated to long term commitments, hotels have the ability to mark rents to market on a daily basis. The upside of this flexibility is that hotels can quickly react to heightened demand and improving economic conditions and raise room rates as much and as fast as the market will bear. In value add scenarios, hotel operators are also able to realize improved asset performance from repositioning efforts or capital improvements more quickly than other asset classes. In this article, we will provide an asset class overview, explain the key metrics that are used to evaluate hotel performance, highlight recent changes in use and conclude with thoughts on how to use this information to make better informed investment decisions.
The industrial sector is arguably the least glamorous commercial real estate asset class. Over the long run, industrial properties are steady performers, which is why they merit inclusion in real estate investment portfolios. The average annual total return for industrial properties over the past 20 years is 10.6%, which is slightly ahead of the average return of 10.2% across all property types, according to the National Council of Real Estate Investment Fiduciaries (NCREIF) Index. In this article, we begin with an overview of the industrial asset class, discuss demand drivers as well as changes in use and conclude with thoughts on how to use this information in making informed investment decisions.
Multifamily real estate is a widely held and strategic commercial real estate asset class. At roughly 25% of the U.S commercial real estate stock, the multifamily sector now accounts for the second-largest share of institutional investors’ real estate holdings, lagging only the office sector. While previously considered a residential asset, multifamily is now firmly cemented as one of the four primary commercial real estate asset classes (the other primary three being office, industrial and retail). In this article, we provide an overview of the multifamily asset class, discuss demand drivers, highlight changes in use and conclude with a synthesis of these factors to better equip investors with the knowledge to make informed investment decisions.