Shlomo Chopp sees a new kind of graveyard forming in commercial real estate—and investors, he warns, aren't yet ready to dance on it.
In his new article, "New Graves to Dance On," Chopp, managing partner of Case Equity, argues that today's downturns demand a different kind of opportunist than those celebrated by real estate legend Sam Zell. Where Zell saw cycles of distress as opportunities to resurrect "dead" properties, Chopp believes the opportunity now lies in recognizing a structural shift reshaping the industry.
The title is an homage to Zell's essays: "The Grave Dancer" from 1975, which explored the risks and rewards of reviving failed assets, and "The Return of the Grave Dancer" in 1984, which traced a new wave of opportunity in an inflation-free era. But Chopp contends that this time, those old rhythms no longer apply.
According to Chopp, the traditional faith in hard assets—the idea that prime real estate will always hold its value—no longer shields investors from volatility. "Commercial real estate is only as durable as the business models that occupy it," he writes. The problem is that those business models now evolve faster than leases expire or debt amortizes.
Lisa Knee, partner and leader of EisnerAmper's National Real Estate Practice, agrees that the sector's challenges cut deeper than a simple market cycle. "We're not just correcting temporary mispricing," she has said in recent commentary on structural shifts in the industry. "We're watching how technology and new consumer behavior redefine demand itself."
For Chopp, this change is nothing less than systemic—"creating a new generation of graves, some already filled, others freshly dug." Rising cap rates, he adds, are not just a reflection of pricing pressure but a signal of tenant instability, shorter valuation horizons, and the growing cost of reinvestment risk.
Too often, Chopp warns, owners are fooled by comforting snapshots—occupancy, rent roll, and net operating income—that disguise deeper vulnerabilities. These metrics do not reveal a tenant's long-term financial health or adaptability.
Technology, he says, has already rewritten the rules. Retail once looked unshakable until e‑commerce shattered its foundation, exposing how deeply assumptions about tenant models could mislead entire investment classes. Now data centers risk repeating the same pattern; treated as the "new golden child," their useful life has compressed from a decade or more to perhaps just five years as hardware and software evolve.
Credit markets, once another perceived constant, are showing cracks as well. Investors long believed tenant credit was a fixed asset, but private‑equity buyouts have flipped that logic—turning household names into credit risks as the acquirers extracted cash and left stores burdened with unsustainable debt.
"We're underwriting like it's still 1984," Chopp cautions. Low cap rates and long holding periods may seem conservative, but the longer capital is locked in, the more it becomes exposed to shifting business models and tenant churn.
To survive the next era, he concludes, commercial real estate investors must think differently: evaluate properties "more like an operating business and less like a perpetual bond."
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.