The 2019 Outlook Issue

Even those among us sporting rose colored glasses are aware we are in the late stages of a cycle that may or may not have been extended by the tax stimulus and an equity market that (until recently) appeared to be on steroids.

A Feast of Plenty

So far this year the commercial real estate market has done well. For the first half of 2018, global transaction volume has increased 13% year-over-year to $341 billion, according to Deloitte. The second half of the year looks to be equally as promising. But you don’t have to be a cynic to wonder how it will all end. Even those among us sporting rose colored glasses are aware we are in the late stages of a cycle that may or may not have been extended by the tax stimulus and an equity market that (until recently) appeared to be on steroids.

Whenever the cycle does officially end, it is likely to be with a soft thud instead of a painful crash. The industry took heed of the painful lessons learned in the run up to the financial market meltdown 10 years ago and has kept underwriting fairly disciplined—and that is true even for the debt providers that have flooded the market looking to place money. To be sure, the feature story in our annual ForumPLUS Debt & Equity Outlook discusses a possible future in which the appetite for these lending strategies has diminished.

But the market is resilient enough to handle it and besides, there will always be providers seeking to enter the space. Case in point: Right now there is about $57 billion in dry powder for commercial real estate debt waiting to enter the market.

But such scenarios are not in our immediate future. As we discuss in our 2019 Investment Outlook, there are numerous opportunities available for companies on the hunt for both yield and long-term plays. Adaptive reuse is one example. So, too, are the industry clusters springing up in secondary markets around the US. For the more traditionally included, value-add urban office assets hold promise for investors. One observer we spoke with notes that investment funds have already raised more than $14 billion dedicated to the asset class.

Meanwhile, the industry is gearing up for what promises to be a very potent new type of investment: the 8,700 or so Opportunity Zones recently certified by the US Treasury. With the proposed rules for these now released, companies of all sizes and strategies are engaged in fundraising for vehicles aimed out these assets, and scouting out potential investments. The tax implications are enormous but so, too, is the ESG (environmental, social, governance) mandate that these funds can fill for investors.

And as always, our year-end issue features our annual coverage of healthcare real estate—a fitting sector for an issue otherwise devoted to CRE’s outlook for the coming year. The field, as our article, Building on Demand illustrates, holds both great challenges and great opportunities, and it is the savvy player that is able to not only navigate but also influence these trends. Speaking of influence, don’t miss this year’s final installment of out Influencers series, in which we focus on the notable Influencers in Healthcare CRE.

As with many of you, we at the ALM Real Estate Group are preparing for the coming year with new approaches and strategies for 2019. Keep an eye out for new things to come from our group in print, online and in person at our events.

IN THIS ISSUE

2019 Investment Outlook: New Year, New Opportunities

2019 Debt & Equity Outlook: The Market’s Insatiable Appetite

ForumPLUS 2019: Debt & Equity Market Leaders

Healthcare Insights: Building on Demand

Real Estate Forum’s Influencers in . . . HEALTHCARE REAL ESTATE