ATLANTA—Are investor strategies different in 2015? The rising US dollar and the talk of rising interest rates and cap rates are certainly causing some to rethink their strategies if the market keeps heading in this direction.
Jacob Frydman, CEO of United Realty, tells GlobeSt.com investors fear the strength of the economy and the pace at which rates will rise. As he sees it, identifying opportunities which will provide upside as interest rates and cap rates rise is a challenging reality.
“Everyone knows the trend is set to reverse,” Frydman says. “But the real trick is identifying assets that have upside potential and then executing on those strategies to build value.”
So, then, what factors does Frydman ultimately see influencing investor strategies? It's a fairly straightforward assessment. There's no question in his mind that it comes down to interest rates and the corollary movement in cap rates.
“I believe the opportunities for investment in commercial real estate are still strong, but in the coming months and years investors are really going to have to take a hard look at property and lease fundamentals to ensure they aren't exposed to undue risks from spiking rates,” Frydman says. “It's going to be much more challenging to preserve and grow capital when the tide starts to turn, and it will require a shift away from core-only properties and passive investment and management philosophies.”
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