CRE Investment Hot Streak Doused By Down Economy
Chair of Herrick's Corporate Department, Morris DeFeo, was quoted in Bisnow in an article discussing how economic forces are affecting deal volume in 2022. The article states that "[e]conomic forces at play across the globe, including the rising cost of capital and the threat of a U.S. recession have caused investors to think twice about how and where to place their money." However, the article further notes the slowdown might be the result of the the lack of sustainability of maintaining the high investment volumes of 2021 and early 2022. "The question now is whether a slowdown induced by higher interest rates will slow the CRE investment volume down too much." The article states that thus far there is scant evidence that investors are backing away from real estate in a major way.
“The extent to which the real estate market has not only survived, but thrived, in the aftermath of Covid is nothing short of remarkable," said DeFeo. "There is a significant amount of capital available for investment in real estate, and inflation and rising interest rates could actually drive REIT growth by attracting investors," DeFeo said.
"In my view, REITs focusing on industrial and multifamily assets will continue to look for acquisition opportunities," DeFeo elaborated "This may slow depending on whether and to what extent the U.S. is affected by a recession, but REITs in these sectors are likely to remain significant purchasers.”