{"id":1004371658,"date":"2019-12-05T13:24:03","date_gmt":"2019-12-05T21:24:03","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004371658"},"modified":"2021-05-15T06:04:51","modified_gmt":"2021-05-15T14:04:51","slug":"defensive-strategies-for-cre-companies","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/defensive-strategies-for-cre-companies\/","title":{"rendered":"Defensive Strategies for CRE Companies"},"content":{"rendered":"
\"\"<\/a>

Image by Nick Saltmarsh via Flickr<\/em><\/p><\/div>\n

As we enter the next decade, most economists and experts agree that a U.S. recession isn\u2019t imminent. But that hasn\u2019t stopped real estate companies from adopting investment strategies and operational tactics that can withstand a slowdown or worse.<\/p>\n

Private equity firm Colony Capital is going all in on what it calls digital real estate infrastructure. The company is making moves to position itself as the leading player in the data center market, which it calls the most recession-proof real estate asset class. Colony will look to invest in data centers, cell tower, fiber optic and small cell networks.<\/p>\n

READ THE DIGEST<\/a><\/p>\n

\"\"<\/a>

Darren Tangen, President, Colony Capital. Photo courtesy of Colony Capital<\/em><\/p><\/div>\n

\u201cThe growth in demand for data transmission and storage<\/a> will continue to far outpace demand for any other commercial real estate asset class in our view,\u201d said Colony Capital president Darren Tangen.<\/p>\n

While most commercial real estate professionals are not sweating a recession, many are taking a hard look at their business strategies as they prepare for a slowdown or worse. Where are the markets that will be least disrupted and most disrupted if the economy does take a hard turn? Where are the pockets of growth that may blossom in the next upcycle? Where can companies tighten their belts so they can ride out a lack of revenue growth?<\/p>\n

\n

READ ALSO: <\/strong>New Supply to Weigh on CRE Return Growth<\/a><\/p>\n

\n

There\u2019s an adage attributed to George Washington that recommends: the best offense is a good defense. LaSalle Investment Management is positioning its portfolio based on that wisdom by limiting its use of leverage and pursuing property types with less exposure to any big market shift\u2014like medical office and self-storage.<\/p>\n

\u201cDiversification is key,\u201d said Rich Kleinman, head of research and strategy at the investment firm, noting  every downturn looks different in terms of what gets impacted and what doesn\u2019t. \u201cBeing diversified is the best protection against acute underperformance of any sector of the market.\u201d<\/p>\n

Smile Time<\/h2>\n
\"\"<\/a>

Richard Kleinman, Head of U.S. Research and Strategy, LaSalle Investment Management. Photo courtesy of LaSalle Investment Management.<\/em><\/p><\/div>\n

As core coastal markets have become less accessible and more expensive, investors are increasingly drawn to secondary and tertiary markets<\/a> or \u201cgrowth markets\u201d as they are now fondly called. Sunbelt markets, in particular, have become particularly popular for multifamily investors due to strong job growth and population growth and affordability. In June, Canadian private equity firm Tricon Capital Group closed on its purchase of 23 multifamily properties (7,300 units) for $1.4 billion. Many other investors have followed suit.<\/p>\n

Shanghai Greencourt Group President Chris Chan noted Chinese investors see the Sunbelt, including markets like Georgia and Louisiana, as a safer bet to invest in. But student and senior housing and data centers are also on investors\u2019 radars. \u201cDiversification going forward will be a pillar in people\u2019s playbook,\u201d said Chan at a recent conference hosted by the Asian American Real Estate Association of America in New York City.<\/p>\n

While commercial real estate is expected to perform well overall in 2020, some sectors are forecast to thrive. Industria, for example, has had runaway success due to the surging e-commerce market that shows no signs of stopping.<\/p>\n

\u201cWe are still early in the game in building out the ecommerce supply chain,\u201d said David Gilbert, CEO and CIO of Clarion Partners, at the NYU Schack Capital Markets conference. Gilbert cited the tremendous pent-up demand for logistics-based real estate<\/a>.<\/p>\n

\"\"<\/a>

Rebecca Rockey, Global Head of Forecasting, Cushman & Wakefield. Photo courtesy of Cushman & Wakefield<\/em><\/p><\/div>\n

The overall industrial vacancy rate for the sector is actually expected to rise as a wave of new product (estimated at 327 million square feet) comes to the market. A third of the product, however, is build-to-suit and nearly is half pre-leased, according to Cushman & Wakefield data.<\/p>\n

 \u201cI think it will remain the darling asset class,\u201d said Rebecca Rockey, Cushman & Wakefield\u2019s global head of forecasting. \u201cWe still expect to see high demand and investor interest in infill and supply-constrained locations. These locations are just so significant to the e-fulfillment ecosystem.\u201d<\/p>\n

Economic Prudence<\/h2>\n

Ecommerce aside, there is a general uneasiness in the economy–due to the length of the upcycle, trade tensions between the U.S. and China, a slowdown in job growth and political uncertainty at home\u2014stymying business investment and occupancy expansions.  <\/p>\n

\"\"<\/a>

Paul Gaines, Managing Director of Asset Management, Accesso Partners. Photo courtesy of Accesso Partners<\/em><\/p><\/div>\n

\u201cThe most common reason is tenants say \u2018well, until we know what the election outcome is and who\u2019s in office and what house controls the economy, we\u2019ll pull back until we figure it out,\u2019\u201d said Paul Gaines, managing director of asset management at Accesso Partners, a company that manages, owns and operates commercial real estate across the U.S.<\/p>\n

In preparations for a downturn, Gaines said, asset managers start to pull back on how much they are willing to provide to new tenants coming into a space. Tenants may expect a certain kind of build-out that requires a significant capital investment, prompting the question: How much are they willing to securitize that lease?<\/p>\n

\u201cWe try to figure out how to backstop risk should this downturn affect tenants and they can\u2019t pay rent and have to downsize because their business hasn\u2019t taken off,\u201d said Gaines.<\/p>\n

Lenders are also watching for increased risk as economic uncertainty threatens property values.<\/p>\n

\u201cSmart sponsor selection ensures we\u2019re doing business with folks that have the operational experience to weather unforeseen events in their business plans,\u201d said Chris Niederpruem, head of Real Estate Finance for CIT.<\/p>\n

\u201cOur underwriting is unchanged from its generally conservative approach. We look closely at property values and leverage to ensure we are comfortable that there\u2019s sufficient alignment of equity and debt.\u201d<\/p>\n

\"\"<\/a>

Heidi Learner, Chief Economist, Savills. Photo courtesy of Savills<\/em><\/p><\/div>\n

Neiderpruem also said CIT is monitoring the differential between Class A and Class B multi-family rentals. Converging, he said, is an indication of a market\u2019s weakness. And overly generous concessions means a sponsor is struggling with keeping his properties full.<\/p>\n

Despite the economic speed bump, however, commercial real estate isn\u2019t expected to take a hard hit.<\/p>\n

 \u201cI think it\u2019s important to remember that commercial real estate in particular tends to have a longer holding period than a lot of other assets, just given its general lack of liquidity,\u201d said Heidi Learner, chief economist at Savills. \u201cSo even if we go through a softer patch of growth, I think CRE should fare fairly well.\u201d<\/p>\n

Read the December 2019 issue of CPE.<\/em><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Commercial real estate companies are taking a hard look at business strategies as they face the possibility of a slowdown or worse.<\/p>\n","protected":false},"author":745,"featured_media":1004371715,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21781,1521],"tags":[40484,32790,33283,32799,33722,34107],"class_list":["post-1004371658","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-corporate-real-estate","category-digital","tag-accesso-partners","tag-clarion-partners","tag-colony-capital-inc","tag-cushman-wakefield","tag-lasalle-investment-management","tag-savills"],"acf":[],"yoast_head":"\nDefensive Strategies for CRE Companies - Commercial Property Executive<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.commercialsearch.com\/news\/defensive-strategies-for-cre-companies\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Defensive Strategies for CRE Companies\" \/>\n<meta property=\"og:description\" content=\"Commercial real estate companies are taking a hard look at business strategies as they face the possibility of a slowdown or worse.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.commercialsearch.com\/news\/defensive-strategies-for-cre-companies\/\" \/>\n<meta property=\"og:site_name\" content=\"Commercial Property Executive\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/CPExecutive\" \/>\n<meta property=\"article:published_time\" content=\"2019-12-05T21:24:03+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2021-05-15T14:04:51+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2019\/11\/industrialinterior.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1200\" \/>\n\t<meta property=\"og:image:height\" content=\"900\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Holly Dutton\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@cpexecutive\" \/>\n<meta name=\"twitter:site\" content=\"@cpexecutive\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/defensive-strategies-for-cre-companies\/\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/defensive-strategies-for-cre-companies\/\",\"name\":\"Defensive Strategies for CRE Companies - Commercial Property Executive\",\"isPartOf\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/defensive-strategies-for-cre-companies\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/defensive-strategies-for-cre-companies\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2019\/11\/industrialinterior.jpg\",\"datePublished\":\"2019-12-05T21:24:03+00:00\",\"dateModified\":\"2021-05-15T14:04:51+00:00\",\"author\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/#\/schema\/person\/9259ffaba4775229ae3556b9555e566d\"},\"breadcrumb\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/defensive-strategies-for-cre-companies\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.commercialsearch.com\/news\/defensive-strategies-for-cre-companies\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/defensive-strategies-for-cre-companies\/#primaryimage\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2019\/11\/industrialinterior.jpg\",\"contentUrl\":\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2019\/11\/industrialinterior.jpg\",\"width\":1200,\"height\":900,\"caption\":\"Image by Nick Saltmarsh via Flickr\"},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/defensive-strategies-for-cre-companies\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/www.commercialsearch.com\/news\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Defensive Strategies for CRE Companies\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/#website\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/\",\"name\":\"Commercial Property Executive\",\"description\":\"\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.commercialsearch.com\/news\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/#\/schema\/person\/9259ffaba4775229ae3556b9555e566d\",\"name\":\"Holly Dutton\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2021\/05\/Holly-D-Dutton-e1622041566670.png?w=75\",\"contentUrl\":\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2021\/05\/Holly-D-Dutton-e1622041566670.png?w=75\",\"caption\":\"Holly Dutton\"},\"description\":\"Holly Dutton is a Senior Editor with Commercial Property Executive and Multi-Housing News. She joined CPE and MHN in 2018 and has reported on the real estate sector since 2012. She was previously with Real Estate Weekly and the Houston Chronicle. Connect with her on twitter: @HollyDutton\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/author\/hollydutton\/\"}]}<\/script>\n<!-- \/ Yoast SEO Premium plugin. -->","yoast_head_json":{"title":"Defensive Strategies for CRE Companies - Commercial Property Executive","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.commercialsearch.com\/news\/defensive-strategies-for-cre-companies\/","og_locale":"en_US","og_type":"article","og_title":"Defensive Strategies for CRE Companies","og_description":"Commercial real estate companies are taking a hard look at business strategies as they face the possibility of a slowdown or worse.","og_url":"https:\/\/www.commercialsearch.com\/news\/defensive-strategies-for-cre-companies\/","og_site_name":"Commercial Property Executive","article_publisher":"https:\/\/www.facebook.com\/CPExecutive","article_published_time":"2019-12-05T21:24:03+00:00","article_modified_time":"2021-05-15T14:04:51+00:00","og_image":[{"width":1200,"height":900,"url":"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2019\/11\/industrialinterior.jpg","type":"image\/jpeg"}],"author":"Holly Dutton","twitter_card":"summary_large_image","twitter_creator":"@cpexecutive","twitter_site":"@cpexecutive","schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/www.commercialsearch.com\/news\/defensive-strategies-for-cre-companies\/","url":"https:\/\/www.commercialsearch.com\/news\/defensive-strategies-for-cre-companies\/","name":"Defensive Strategies for CRE Companies - Commercial Property Executive","isPartOf":{"@id":"https:\/\/www.commercialsearch.com\/news\/#website"},"primaryImageOfPage":{"@id":"https:\/\/www.commercialsearch.com\/news\/defensive-strategies-for-cre-companies\/#primaryimage"},"image":{"@id":"https:\/\/www.commercialsearch.com\/news\/defensive-strategies-for-cre-companies\/#primaryimage"},"thumbnailUrl":"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2019\/11\/industrialinterior.jpg","datePublished":"2019-12-05T21:24:03+00:00","dateModified":"2021-05-15T14:04:51+00:00","author":{"@id":"https:\/\/www.commercialsearch.com\/news\/#\/schema\/person\/9259ffaba4775229ae3556b9555e566d"},"breadcrumb":{"@id":"https:\/\/www.commercialsearch.com\/news\/defensive-strategies-for-cre-companies\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.commercialsearch.com\/news\/defensive-strategies-for-cre-companies\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.commercialsearch.com\/news\/defensive-strategies-for-cre-companies\/#primaryimage","url":"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2019\/11\/industrialinterior.jpg","contentUrl":"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2019\/11\/industrialinterior.jpg","width":1200,"height":900,"caption":"Image by Nick Saltmarsh via Flickr"},{"@type":"BreadcrumbList","@id":"https:\/\/www.commercialsearch.com\/news\/defensive-strategies-for-cre-companies\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/www.commercialsearch.com\/news\/"},{"@type":"ListItem","position":2,"name":"Defensive Strategies for CRE Companies"}]},{"@type":"WebSite","@id":"https:\/\/www.commercialsearch.com\/news\/#website","url":"https:\/\/www.commercialsearch.com\/news\/","name":"Commercial Property Executive","description":"","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.commercialsearch.com\/news\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Person","@id":"https:\/\/www.commercialsearch.com\/news\/#\/schema\/person\/9259ffaba4775229ae3556b9555e566d","name":"Holly Dutton","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.commercialsearch.com\/news\/#\/schema\/person\/image\/","url":"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2021\/05\/Holly-D-Dutton-e1622041566670.png?w=75","contentUrl":"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2021\/05\/Holly-D-Dutton-e1622041566670.png?w=75","caption":"Holly Dutton"},"description":"Holly Dutton is a Senior Editor with Commercial Property Executive and Multi-Housing News. She joined CPE and MHN in 2018 and has reported on the real estate sector since 2012. She was previously with Real Estate Weekly and the Houston Chronicle. Connect with her on twitter: @HollyDutton","url":"https:\/\/www.commercialsearch.com\/news\/author\/hollydutton\/"}]}},"jetpack_featured_media_url":"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2019\/11\/industrialinterior.jpg","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/www.commercialsearch.com\/news\/wp-json\/wp\/v2\/posts\/1004371658","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.commercialsearch.com\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.commercialsearch.com\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.commercialsearch.com\/news\/wp-json\/wp\/v2\/users\/745"}],"replies":[{"embeddable":true,"href":"https:\/\/www.commercialsearch.com\/news\/wp-json\/wp\/v2\/comments?post=1004371658"}],"version-history":[{"count":10,"href":"https:\/\/www.commercialsearch.com\/news\/wp-json\/wp\/v2\/posts\/1004371658\/revisions"}],"predecessor-version":[{"id":1004533608,"href":"https:\/\/www.commercialsearch.com\/news\/wp-json\/wp\/v2\/posts\/1004371658\/revisions\/1004533608"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.commercialsearch.com\/news\/wp-json\/wp\/v2\/media\/1004371715"}],"wp:attachment":[{"href":"https:\/\/www.commercialsearch.com\/news\/wp-json\/wp\/v2\/media?parent=1004371658"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.commercialsearch.com\/news\/wp-json\/wp\/v2\/categories?post=1004371658"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.commercialsearch.com\/news\/wp-json\/wp\/v2\/tags?post=1004371658"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}