Tina Lichens TinaLichens

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As the cycle matures and opportunities for yield grow scarce,investors are changing up acquisition strategies. According to arecent sentiment report from RCM LightBox,investors are showing increased caution this year in response to acombination of peak cycle fundamentals and the presidentialelection this year. The caution is playing out as strategic shiftsin business objectives and acquisition goals.

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"Investor strategies are varied, depending on their investmentobjectives, time horizons, and the property type they favor,"Tina Lichens, COO at RCM LightBox, tellsGlobeSt.com. "Some investors are looking to secondary and tertiarymarkets where increasing population and changing demographics meansound investment opportunities are still available."

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The pool of active investors in the market has also shifted withsmaller investors and private capital driving investment volumes."The profile of today's office investor, for example, has changedand for the foreseeable future is likely to remain more oriented tofamily offices, real estate private equity firms and largerinsurance companies," says Lichens. "They are gravitating tomarkets where there is a strong supply of talent to support growthin technology and other sectors."

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These investors are also making safer bets on investment assets.While value-add deals have been the most sought-after assets thiscycle, investors are now looking for stabilized, lower risk assetsthat can survive a potential downturn. "With the lateness in thecycle, many investors increasingly are considering stabilizedassets as a practical, defensive move. In buying a stabilizedasset, investors are not simply looking at occupancy, but are alsofocusing on Weighted Average Lease Term (WALT) of the tenants inplace," says Lichens.

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Stabilized assets have the benefit of predictability, and thatis really what today's investors are after. "A lot of buyers,particularly those acquiring stabilized assets, don't want a lot ofrollover," says Lichens. "They're looking for healthy, predictablecash flow levels that will produce targeted internal rates ofreturn for investors."

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With fear of a downturn looming, investors are also rethinkingtheir exit strategy. "Additionally, one of the greatest concerns ofinvestors today is the ability to hit exit numbers three to fiveyears down the road," says Lichens. "Most investors are being veryconservative in terms of hold and sell times, rental rates, tenantimprovements and capital expenditures as they look to hit theirtarget IRR for a strong exit. These practical assumptions are acontributing factor toward keeping the risk/return relationship incheck."

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Kelsi Maree Borland

Kelsi Maree Borland is a freelance journalist and magazine writer based in Los Angeles, California. For more than 5 years, she has extensively reported on the commercial real estate industry, covering major deals across all commercial asset classes, investment strategy and capital markets trends, market commentary, economic trends and new technologies disrupting and revolutionizing the industry. Her work appears daily on GlobeSt.com and regularly in Real Estate Forum Magazine. As a magazine writer, she covers lifestyle and travel trends. Her work has appeared in Angeleno, Los Angeles Magazine, Travel and Leisure and more.