One constant in economics over the past six months has been volatility. Changing trade policies, combined with business uncertainty, have also put pressure on real estate investment decision-making.
A recently released real estate market sentiment report by Agora reveals that CRE investment firms have changed their strategy for 2025 while raising capital continues to be a challenge.
The specific key takeaways include the following:
- 49% of respondents indicated they would be moving into new CRE asset classes, while 48% announced they are targeting new regions
- 84% of respondents indicated they’re focusing on historically stable, income-producing asset classes; however, 48% stated an opportunistic strategy
- 58% of those surveyed said they are finding it more difficult to raise capital
- 76% of respondents added that their investors are concerned about market volatility
Agora’s Vice President of Marketing Asaf Raz told ConnectCRE that the numbers were not all that surprising, at least from a big-picture perspective. “What did stand out was how quickly firms are ramping up investor communication,” he said. “More than one third said they are now sending weekly updates, which used to be a quarterly rhythm for most.”
Finding the Money
When it comes to finding the liquidity for investment, Raz explained that investment firms and general partners are adjusting their strategies to ensure enough powder is available to buy and/or renovate. He said that some are relying on partial refinancing or increasing preferred equity in an effort to free up cash.
Then there is asset management. “A lot of groups to drive cash flow internally, especially if a recession hits,” Raz said. In such a situation, speed becomes the essence. “The groups that can quickly show real performance, down to the line item, are the ones unlocking liquidity first,” he added.
Talk to Me, Please
As mentioned above, firms and partnerships are boosting communication efforts to their investors; 38% indicated they were sending weekly updates, while 28% said they are reporting monthly.
Raz explained that the shift to greater communication effort is due to fast-moving markets and economic changes. When markets are calm, the quarterly PDF update generally works. However, “now that things are moving quickly, investors want real-time insights,” Raz said.
Other Takeaways
Other information includes the following:
Multifamily is the first asset of choice, with mixed-use coming in second. Raz explained that mixed-use assets offer plenty of diversification. They combine the stability of rental residential with service retail. “That kind of setup tends to perform well in neighborhoods where people want convenience without needing full-scale retail,” Raz pointed out.
The Sunbelt is not as popular as it once was. At one point, investors were crazy about Sunbelt states as destinations for their funds. These days, 2% of respondents said they are targeting the Sunbelt region for investments, while 28% indicated they would be focusing on the southeast. Raz noted that the Sunbelt, as a category, lost some of its appeal due to price appreciation. “We’re seeing capital flow toward individual markets, places like Greenville, Huntsville and Tampa. They are no longer chasing broad regional narratives,” he said.
Uncertainty will continue, for now. Raz said that most respondents anticipate the current situation to last at least for another 13 months, which is shaping underwriting and other strategies. Additionally, younger managers are more ready to adopt technology and change strategies. Added Raz: “The firms that lead into digital tools, especially for reporting and capital raising, will be in a stronger position when the market turns.”
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