The Great Balancing Act

In the past month, many of the green lights on the economic dashboard turned red. Most economists agree that we are unlikely to slip back into recession any time soon, but growth will remain below potential for some time and risk levels will remain elevated.   The traditional investor demand for higher yields given the higher risk isn’t playing out as one might expect. A record volume of capital on the sideline has rushed into high-quality commercial real estate over the past 18 months, resulting in a dramatic re-compression of yields at the upper-end of the market. True distressed opportunities via conventional fire sales by government agencies or lenders have been limited to low-quality assets in weak areas. As expected, there is no RTC 2 anywhere in sight. So, what is the best strategy for CRE investors?