Opportunities in a down market: Where should commercial real estate look?
Frank Spadafora, Industry Principal for Real Estate, DealCloud
Commercial real estate is definitely facing some headwinds given the inflationary environment that we are in, And that has certainly changed the structure of deals. It has slowed down transaction volume.
But it’s also a massive opportunity for commercial real estate. So with the slowdown in transaction volume, we’re seeing a lot of commercial real estate firms look inward. Look at their existing portfolios, their existing assets, how are they performing? Are they optimized? And certainly there is a component of technology that enables that, but they’re also focused on optimizing their operations, becoming more efficient, improving their decision making with more data.
So while we are seeing a slowdown in the deals that are in process due to structuring challenges, we’re seeing a slowdown in transaction volume, there is a lot of dry powder. There’s a lot of capital that is pent-up and really looking to invest in commercial real estate. It’s giving commercial real estate firms the opportunity to decide how should they execute — and technology is a huge enabler in that space. When you look at how do you operate cheaper, better, faster, how do you execute, how do you find more deals, how do you optimize your teams so that they have access to the critical data they need for decision making.
So I think that we’re at an interesting inflection point, where a lot more firms are going to turn inward and look at how they improve their operations, their performance, and really at the end of the day, the yield that they’re producing from their portfolios.
For more insights on commercial real estate opportunities, see 2023 private equity trends: What LPs are saying about the real estate market.