What CRE Investors Can Expect from Debt, Equity Sources Right Now
The pandemic continues to devastate portions of the U.S. economy, but investor confidence is expected to return in 2021 with the rollout of COVID-19 vaccines and more stimulus funding.
Signs of a returning investment market are already evident, according to industry sources. Investment sales activity increased in the second half of 2020, and investors continue to seek acquisition opportunities, as well as equity and debt sources to support their goals, according to John Chang, senior vice president and national director of research with brokerage firm Marcus & Millichap. In a recent optimistic report on investment levels, he noted that while transaction activity in the last quarter of 2020 was below that of fourth quarter of 2019, it still surpassed transaction activity in 2006, at the height of the last real estate cycle.
“Investors are beginning to focus on upside potential, and fueling that drive will be an unprecedented wave of capital,” Chang says, noting that currently there is about $5 trillion available in U.S. Money Market Mutual Funds and $16 trillion in U.S. savings deposits. Chang contends that the rollout of vaccines, along with the upcoming stimulus package, should begin to erode investor uncertainty, unlocking this wave of capital for investment.
There are other signs of a returning investment market, according to New Jersey-based Nathan Florio, a principal with Deloitte Risk & Financial Advisory Sponsorship. He cites that some debt funding sources that had paused activity during the pandemic are now back in play, in particular participants in the securitization market and mortgage REITs. The CMBS market, in particular, is providing very advantageous terms for certain property types, such as data centers, notes Florio.
Meanwhile, there is an ocean of capital available from a range of equity sources, including small private investors, friends and family groups, high-net-worth investors, family offices, pension and sovereign wealth funds, banks, insurance companies and REITs, says New York-based Richard Katzenstein, senior vice president and national director of Marcus & Millichap’s Capital Corp.