As Investors Re-Enter the Market Many are Diversifying

If you have been sitting on the sidelines, now is the time to get back in the game, according to Robert Johnston of Levin Johnston at Marcus & Millichap. At the end of 2020 and in early 2021, investors have ramped up investment activity. Over the last several months, Johnston’s team has closed $160 million in deals, illustrating the increasing interest in deal activity. Investors still on the sidelines are potentially missing opportunity.

“Now is the time to start thinking about investing again. During the fourth quarter of 2020 and in the first quarter of 2021 we have directed a combined total of more than $160 million in transactions, which indicates that investors are looking for deals in the western U.S. and the Bay Area in particular,” Johnston, a senior managing director at the firm, tells GlobeSt.com.

Investment activity has paralleled coronavirus transmission rates through the pandemic, and as vaccines are distributed, investors are showing a renewed confidence. “All signs point to the pandemic subsiding as COVID case numbers are plummeting and people are increasingly getting vaccinated. That means we are closer to the country opening up fully again, which is very good for commercial real estate. It’s better to be ready to strike when the time is right than to be behind the eight ball and not prepared when a good deal comes along,” says Johnston.

While investors are re-entering the market, many are making strategic changes. Some are diversifying into new markets while others are diversifying into new asset classes. “Just as diversifying geographically is a wise move, so is diversifying among asset classes, especially in these unusual economic times,” says Johnston. “It may be smart for investors to think about the different product types in which they are comfortable investing right now—whether it’s net lease, industrial, or an alternative asset class.”

Diversification is especially attractive to multifamily investors that have been impacted by the pandemic. Net lease offers an attractive alternative opportunity. “As wealth advisors, sometimes we recommend going out of multifamily investments and finding value in something like a net-lease or self-storage transaction,” adds Johnston. “These product types can often yield the types of returns our clients are seeking because some of these types are not as well-known and there is less competition driving up prices.”

This year, Johnston expects a strong year of investment activity, particularly considering velocity at the beginning of 2021. “We have strong confidence in CRE’s ability to deliver for our clients, and we will continue to advise them to transact in the right markets and asset classes when the time is right for them,” he says. “We directed over $317 million in sales over 47 transactions during 2020 despite the pandemic, and we have 10 transactions totaling just over $140 million under contract set to close in Q1, so we’re positioned to have another very successful year in 2021.”