LOS ANGELES—With so much capital in the market, a potential tapping of the breaks by investors could be a welcome change in the near future, said speakers at RealShare National Investment & Finance. Panelists on the “Power Panel: Direct From the C-Suite” session recognized the next phase of the cycle is looming and that this might be good for the industry.

Moderator Lew Horne, president of the Greater Los Angeles/Orange County region for CBRE, gave an overview of the global markets, saying North America led in outbound capital in 2014 at $65.5 billion. Many global buyers were seeking value-add opportunities.

Fred Schmidt, president and COO of Coldwell Banker Commercial Affiliates, continued the conversation by stating that multifamily continues to be the darling of the industry. In the different property sectors, office's per-square-foot per employee is down, so the rate of square footage absorption in office was not as high as in the past. In retail, grocery-anchored shopping centers are a strong demand driver, and brick-and-mortar stores will not go away, but the war will occur in the supply chain. “Millennials will determine the demand drivers for the next 20 years,” he said, adding that energy, education, medicine and technology are driving job growth in the central business districts.

Horne asked the panelists, “What is responsible investing and how is it playing out?”

Lydia Tan, SVP for Bentall Kennedy, said her firm has both a short- and long-term view that's directly accretive to the bottom line. “We're looking at resilience, too. We want to make sure we're up and running and being corporately responsible. This speaks to our clients and tenants.”

Horne says energy-saving measures in commercial properties can save $3 per square foot. “Now, we're looking at wellness at $300 per square foot.”

Warren de Haan, founder and managing partner for ACORE Capital, said owning US-based assets is a great inflation hedge. “There's tons of flow coming into the market, lots of bonds.”

Thomas Whitesell, managing director, construction real estate, for Capital Source, said the spigot got turned on at the end of last year since investors needed to meet their allocations, and standards were becoming more lax. He explained the new high-volatility CRE rules, saying the borrower needs to put 15% cash equity in construction and only gets credit for the purchase price, so it's 15% of the complete value. “Certain things can't count toward equity. Also, the borrower can't get any money out of it until the lender gets paid back, which needs some reworking—the regulators are trying to figure it out. If you have 15% in a deal, we'll lend out. That's where this rule will likely end up.”

Ken Perry, president and CEO of the Swig Co. LLC, said, “It appeals to me to have a little bit of a slowdown because the amount of capital flowing is a little frightening. Residual caps are very low, so it's hard to make sense as an investor. There are still pockets of opportunity. We're very cautious; Swig will probably be a seller this year. We will be spending $100 million in capital this year on tenant improvements, etc.”

Horne asked if Swig will be pushing rental rates in light of these improvements, and Perry said, “Absolutely; we're taking the long-term view. We're not pushing rates to the top of the market, but we're taking advantage of the fact that rents are higher in core markets.”

Tan said her firm likes Portland, San Diego, Seattle and San Francisco. “We like CBDs and creative space. We want to address one-of-a-kind properties that are going to last and be in genuine neighborhoods.” She said San Francisco has a growth moratorium right now.

Horne asked how foreign investment is affecting the ability to finance, lease and develop properties. Schmidt said foreign capital “has driven down cap rates. It's not what we predicted a year ago. Are exit cap rates going to be justifiable? We don't know. Overseas, they're fighting deflation and it impacts us here.”

de Haan pointed out that Chinese capital comes with a communication barrier and a different precedent over how they do business. “It requires a different level of thought to the underwriting. Also, EB-5 money is prolific. A large percentage of foreign people want to be in the US market.” He added that EB-5 money is currency for a sponsor to get paid better. “It's super-cheap money and a super-safe loan.”

Horne asked about technology's impact on the food groups of commercial real estate, and de Haan said there's more impact on the equity side and a danger regarding prices in retail. “Does this make sense for us? With changing technology, will demand keep up in office?”

Perry concluded, “Place is still important, but how we transact within it is changing.”