May 24, 2023
The troubled Office sector is just one of the major property types within the CRE debt market, along with Hotels, Industrial, Multifamily and Retail, but the narrative surrounding CRE seems to be applied to all sectors. Separately, banks and CMBS have pulled back significantly as sources of loan supply ahead of an expected pickup in refinancing activity. We see opportunities in today's admittedly volatile market environment to invest at potentially lower leverage points, higher yields and more favorable structures.
KEY TAKEAWAYS
The narrative surrounding US commercial real estate (CRE) seems to be applied to all property types, but we believe fundamentals outside of Office remain relatively healthy
With banks and CMBS having pulled back from the market, a void has been created, while we expect lending to pick back up as over $2.5T in loans mature through 2027
Current market volatility can allow investors to lend at lower leverage points and higher yields, as well as more favorable structures (e.g., tighter loan covenants)
It can be difficult for investors to maintain, or even increase, CRE exposure in the current environment, but we believe it is the right time to do just that
(1) Trepp, Inc. Based on Federal Reserve Flow of Funds data through Q3 2022. (2) Cushman & Wakefield. Quarterly yields through 31 March 2023. CRE data is calculated by PPM using third-party sources, in particular Cushman & Wakefield.
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