Is the real estate market overheated? 

 

In October 2014, PwC published a report based on interviews of dozens of leading real estate professionals across a number of sectors and disciplines. The report, “Emerging Trends in Real Estate® 2015,” predicted that the momentum of the last five years would continue but cautioned investors to take nothing for granted. “It is possible to stretch for opportunities—you just have to be aware of how much runway you have left in the current cycle.” Experts also observed that the private equity sector held some advantages in finding opportunities for value creation outside the core properties sought by institutional investors, saying, “There is a nimble- ness in the private equity sector and a deal-oriented mentality that is more open to noncore properties and markets away from the gateway cities.” The challenge for active investors is to locate the right deals and the right partners among conflicting viewpoints for the current market in an asset class that is decidedly a long-term hold.

 

Some industry experts indicate a serious shortage of opportunities in the U.S. market due to a significant amount of money already consuming “A” properties and quickly gobbling up the “B”s. Much of this is cited in the form of foreign investment in the relatively safe haven of the U.S. and the dry powder of traditional institutional funds chasing niche markets and higher risk properties, normally the investment of choice for private equity. Others believe this market contrasts significantly from the market of 2007, as investors and lenders “once burned, twice shy” have not overbuilt or overleveraged this time around, allowing for plenty of room for growth and return in the sector.

 

There are also a number of demographic factors that affect long-term strategies in real estate. Is it where investment analysts and media lead us to believe value of the future exists? Some of the demographic trends cited include:

 

 

Making sense of these trends and assessing their impact demands focus and expertise. At the 2015 FOX Fall Forum, October 21-23 in Chicago, I will be moderating a panel of family led real estate experts who discuss their strategies and their approach to uncovering value in the market, as well as their take on demographic trends well known in popular opinion circles that are not necessarily reflective of value creation and growth potential in the market. Ken Franasiak of Calamar, Jordan Slone of Harbor International and Peter Knell of KCB Management will also discuss how families can strategize across a number of available public and private, direct, fund and REIT vehicles to build a solid long-term real estate portfolio. I hope to see you there.