There has been a tremendous amount written about how slow the real estate transaction market is right now. I am certain that Holiday Season 2023 is going to be the slowest year end most of us have ever experienced. We all know the story. Institutional investors are largely on the sidelines, generally having raised capital around a strategy that is murky at best in the current market. Many private investors are quite content on the sidelines as well, especially when they can put any available cash into a certificate of deposit that can yield over 5% risk free. To make matters worse, many investors who are willing to commit capital struggle to find a lender that will make a loan. The results are abundantly clear, by all measures transaction velocity is way down. 

Despite the well documented factors mentioned above, it feels to me like in the past 60 days there has been an increase in activity that has yet to be reflected in the statistics. Though this statement may largely be anecdotal, as I am looking at my own whiteboard and relying on conversations with others who are seeing the same thing, I stand by it.  To be clear, we are far from an orderly market and are squarely in what I call an event driven transaction market. There are many factors that can drive a sale or recaptalization: A debt maturity, fund life issue, a need for capital elsewhere in the portfolio, a partnership issue and so on.  Sellers have generally been putting off doing ANYTHING if possible and it stands to reason that in some cases they can't wait any longer. Ultimately, I believe these transactions will systematically increase in number and provide us with some directional market pricing. For the time being, the numbers are not great enough that you identify market trends with true accuracy, but from where I sit you can certainly see some of the market psychology evolving.

As a lifelong sailor, I enjoy reading about and looking at all kinds of boats. I am fortunate enough to be able to spend some time on the Eastern shore of Maryland, which has a rich and deep history of boat building. Some of the best and most experienced boat builders that build the iconic workboats of Chesapeake still build their boats by hand. They don't use detailed computer-generated plans, molds that have come from a factory or any other technology that has become standard. Instead, they use their experience building other boats, their knowledge of the local marine environment, and an understanding of how the boat will be used to build it. They know what they need to build, adjust along the way based on what they see and the finished product rivals the quality of any modern boatbuilders. They use what they call "Rack of Eye". They don't need plans or analytics to build what they know will work, they know instinctively. To me, this is almost precisely how many investors who have the conviction to act in today's market are looking at deals. It may be a combination of price per SF, cash yield, and locational attributes that individually may not strike a chord but together give the investor a gut feel that they are getting a good deal and have the confidence to proceed.