At the end of January, I had the great pleasure of attending IMN’s Winter Forum on Real Estate Opportunity & Private Fund Investing in beautiful Laguna Beach, CA, along with CrowdStreet’s VP Sales Dan Laun and VP Investments Ian Formigle.
This was CrowdStreet’s second year at IMN, and it proved to be a fantastic opportunity for us to demonstrate our growing platform and how CrowdStreet has emerged as a leader in online investing for commercial real estate.
Here are our top five takeaways from the IMN event:
1. Despite current stock market correction anxiety, 2016 will be another good year for CRE investing. With a few regional exceptions, fundamentals are in place for continued economic expansion, job growth and CRE appreciation. Caution should be applied to primary cities where CRE values are at historical highs.
2. A cautious approach to underwriting is increasingly important in order to avoid overpaying for assets. In certain markets and property types we are past peak pricing while in other markets we remain in the expansion phase of the economic cycle. Therefore, stress testing pro-forma assumptions and exit cap-rate scenarios is an essential exercise.
3. Capital remains plentiful for large institutional-quality CRE investments. However, capital is selective in secondary and tertiary markets as well as for small balance CRE deals. Bank financing restrictions has created a larger equity gap which needs to be filled by mezzanine debt, joint venture or common equity.
4. While stabilized income and 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 projects continue to capture most of investment activity, new ground-up development is finally picking up as the availability of vacant space in existing buildings continues to shrink. Developers are busier than they have been since 2006, trying to get projects out of the ground while the economy is in expansion mode and unemployment rates continually drop. Speculative development remains scarce except in the hottest markets.
5. Online-fundraising has emerged as a viable method of capitalizing a CRE investment. The leading crowdfunding portals coupled with do-it-yourself technology solutions have driven many innovative CRE investment firms to the internet to access the 9 million U.S. accredited investors. New legislation in 2016 will open access to unaccredited investors, a move that will further accelerate online-fundraising for CRE.