Q2 Earnings Fails to Provide Consistent Picture to CRE Landscape – Lee Chandler

A review of market reports issued by commercial real estate analysts and publications following the release of Q2 2020 earnings shows little consensus about the state of the investment landscape. According to Berkadia’s 2020 Mid-Year Powerhouse Poll, “55% of Berkadia professionals agree that current market activity is better than expected compared to how they initially thought COVID-19 would impact the industry overall. Thirty-four percent say the current market is in line with their expectations.”[1] However, market research provided by AEW reveals that according to Real Capital Analytics transaction volume is down nearly 70% Q2 2019 levels.[2]

[1] https://www.globest.com/2020/08/06/cautiously-confident-multifamily-waits-for-election/

[2] https://www.aew.com/research/north-america-flash-report-covid-19-special-update-3

While some firms are touting the success and resiliency in the suburban multifamily portfolio, claiming COVID-19 pressure on market fundamentals has driven renters from urban centers, new research from Apartment List shows the opposite is true in some markets.[1]

[1] https://www.globest.com/2020/08/06/cautiously-confident-multifamily-waits-for-election/

[1] https://www.aew.com/research/north-america-flash-report-covid-19-special-update-3

[1] https://www.globest.com/2020/08/03/moving-stats-dont-support-urban-exodus/

So amid all this conflicting information, what, if anything, can be relied upon? Sound investment fundamentals. Through sound research and analysis, develop an investment thesis that is in line with and supported by the trends of near future. After that, rely on the basics. Using Multifamily as an example:

  • Is the asset supported by growing population and employment statistics?
  • Are there strong demand drivers in reasonable proximity?
  • Is demand expected to outpace supply?
  • How many units are expected to come online in a market in the next 12-24 months?

By having conviction in an investment thesis and applying solid investment fundamentals, individual investors should look to take advantage of opportunities available while the market continues to seek solid ground.

 

 

[1] https://www.globest.com/2020/08/03/moving-stats-dont-support-urban-exodus/

Author: Conor O’Halloran

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