Pockets of opportunity in a shifting real estate market

The dramatic upswing seen across many sectors of the real estate market over the past several years appears to be abating, with a new sense emerging that the market has hit pause. Deal pace has slowed as buyers and sellers assess the changing market environment, and investors are now closely analyzing how lending practices and the upcoming changes in the administration will affect their portfolios moving forward. While there seems to be no shortage in capital, funds and investment managers are taking their time, carefully combing for smart deals, and adopting a wait and see approach as the market transitions.

An experienced fund manager like Ethika Investments relishes this period in the market cycle, because it creates various pockets of opportunity for the company and its investors that may not be immediately obvious. First and foremost, it’s incredibly important to acknowledge the vast discrepancies across asset types and markets and the importance of a diversified portfolio. Should an unforeseen event affect any one asset negatively, the diversification you will find in a real estate private equity fund like Ethika protects investment by creating balance with other over-performing assets in the portfolio.

While there is turbulence in the hospitality sector as the gap widens between buyers and sellers, office and retail are offering solid investment opportunities with a substantial upside if you know where to look. For the office sector, positive projections for the next three years anticipate absorption of existing office space to total 175 million square feet, which is more than the past eight years combined.

What sets this new wave of demand apart is the type of creative spaces employers are now seeking. Open and flexible floor plans with the ability to reconfigure on a whim along with more inspired and authentic architecture – think exposed brick and vaulted ceiling heights –  are quickly replacing the more traditional office spaces that defined the previous cycle. With effective rents anticipated to increase 3.7 percent annually from 2015-2019, there is a strong investment opportunity in the office sector for those willing and able to deploy capital and adapt their vacant spaces.   

The Ethika team possesses a deep understanding of the nuances within the real estate marketplace, and an ability to spot the pockets of opportunity, not only in the commercial office sector, but across the great real estate landscape, that will undoubtedly arise from this period of uncertainty.

Andres Szita is Chairman of Ethika Investments

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