Institutional investors should focus on value-add opportunities as the U.S. commercial real estate markets continue to recover, according to a new white paper issued by financial services firm Credit Suisse.
Overall, the report notes that the prospects for the commercial real estate sector remain positive. “Furthermore, the U.S. market may be less risky in comparison to other global regions, since the U.S. economic recovery is expected to be more pronounced and more likely to occur before most other developed economy turnarounds. As primary markets for commercial real estate have already shown signs of recovery, it is important to consider select opportunities carefully, focusing on those that have not yet been fully adjusted on a valuation basis to the improving conditions.”
The paper, Commercial Real Estate: Has the Tide Turned?, is authored by Kelly Williams, head of Credit Suisse’s Customized Fund Investment Group; Nadim Barakat, Chief Investment Officer, Customized Fund Investment Group; and Peter Braffman, Partner, Customized Fund Investment Group—Real Estate.
According to the authors, the multifamily sector has the best fundamentals and has attracted significant amounts of capital, but investors should be wary. “This trend of increased capital flow into multifamily warrants a cautious view on pricing.”
Much of the report focuses on value-add opportunities for institutional investors, with a few sector-specific recommendations: