The Urban Land Institute (ULI) has just published their annual Emerging Trends in Real Estate report for 2019. This report is one of the most highly regarded and widely read forecast reports in the real estate industry, and one we look to, both to anticipate future-looking trends in commercial real estate investing, as well as to validate deal flow and ensure that the CrowdStreet marketplace is adequately meeting the demands of our investors. ULI publishes a set of “Expected Best Bets” as a part of this report, as thematicized by interviewees and survey participants representing a wide range of industry experts, including investors, fund managers, and developers. Please see ULI’s “Expected Best Bets for 2019,” excerpted below (alongside those relevant CrowdStreet marketplace offerings that best exemplify ULI’s best bets). You may also click here to download and read their full 121-page report.
Expected Best Bets for 2019
1. Quick-flip Properties are considered value-add when they have management or operational problems, require some physical improvements and/or suffer from capital constraints. By making physical improvements to the asset that will allow it to command higher rents – remodeling the kitchens in multi-family, installing more energy efficient heating systems in a medical office, etc. – improve the quality of tenants and increase... More deals
It’s all about timing, and interviewees from both the institutional and entrepreneurial realms see late-cycle opportunity. The window of opportunity is narrow—the ability to execute by 2020 is key. And the geographic focus needs to be in markets where assets have not yet been priced to perfection. These are mainly second-tier markets in the South and Intermountain states. Affordability to middle-market tenants—both commercial and residential—describes where underserved demand can be satisfied. This is not low-hanging fruit by any definition; but for yield-oriented investors with turnaround expertise, such deals are right in their wheelhouse.
Click here to see the CrowdStreet offerings that fit into the category of “Quick-flip value-add deals”.
2. Garden apartments
While the multifamily sector registered an overall NCREIF total return of 6.38%, the garden apartment component was near a double-digit total return at 9.33%. Appreciation in value accounted for the overperformance in the garden apartment group. Pricing for garden complexes reflects a higher-yield 5.7% The capitalization, or “cap”, rate is used in commercial real estate to indicate the rate of return that is expected to be generated on a real estate investment property. The calculation is based on the Net Operating Income the property generates divided by the Purchase Price. Lower cap rates (3-5%) generally point to safer / less risky investments and are... More, compared with 4.9% for mid-to-high-rise properties. The strong move toward secondary and tertiary markets, and the return of interest to suburban assets—especially by private equity—bode well for these multifamily assets.
Click here to see the CrowdStreet offerings that fit into the category of “Multifamily apartments”, and peruse the offering photos to identify which assets are garden-style.
3. Redeployment of obsolescent retail assets
Many shopping center properties are just not going to come back as successful retail assets. But while few have been reduced in price to mere land value, many are well below replacement cost and have good locations for alternative uses. If a site is sufficiently large, mixed use is a great option for close-in suburbs looking to exploit maturing millennials’ desire to enter their next life-cycle phase. There also is an opportunity to turn the tables on the e-commerce trend that fostered the obsolescence by redevelopment into distribution facilities.
Click here to see the CrowdStreet offerings that fit into the category of “Redeployment of obsolescent retail assets”.
4. Industrial development
The expansion of e-commerce is far from over, and the need for facilities to accommodate a denser distribution network is acute and will only increase over time. Warehouse/distribution vacancy is at a historic low, as one senior adviser noted in his interview. While ports and hub cities still play key roles, infill opportunities give “last mile” break-bulk sites—even multistory properties—a chance to join the party. Barring a trade war of serious proportions, industrials offer great risk-adjusted returns.
Click here to see the CrowdStreet offerings that fit into the category of “Industrial development”.
How to get broad exposure to CrowdStreet offerings without having to choose
We know that with 30+ live deals at any given moment, and with the amount of time and effort it takes to conduct due diligence on any given offering, it can be overwhelming trying to figure out where to start. That’s why we created the CrowdStreet Blended Portfolio.
CrowdStreet Blended Portfolio
With the CrowdStreet Blended Portfolio, getting started in commercial property investing has never been simpler. Click here to learn more.
- Diversified exposure to 30 – 50 offerings with one single investment
- Low minimum investment of $25,000
- One single composite K-1 delivered at tax time
- Passive investing methodology: The Portfolio employs a rules-based approach with allocation parameters to select assets. It does not “pick winners” but, instead, allocates capital efficiently and systematically across eligible Marketplace offerings.
Please reach out to our Investor Relations team if you have any questions by emailing [email protected].