Changing Dynamics of CRE Management

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CEO of Lobby CRE, Anne Hollander, discusses how market dynamics are driving change in CRE management. In this webinar, Anne goes into greater detail about the economic, social, and digital changes the market has experienced, as well as her best practices for managing your portfolio with these changes in mind.  

Unprecedented Changes

The rather unprecedented situation we’ve found ourselves in during the past two years has placed us in a radically new inflection point with economic, social, and digital changes. Anne Hollander calls this, “The Perfect Storm.” Whether you view these changes positively or negatively, Anne believes it is important to adapt regardless. 

The Perfect Storm

Over the past couple of years, investors looking for a safe haven for their funds have turned to real estate en masse for its attractive returns and relative stability. This increased investment volume has caused cap rates to decline, and it is forecasted that they will continue to do so. While we haven’t seen conditions like these in a long time, our economic foundation is still solid. The investment in and management of commercial real estate is based on strong market fundamentals. Most of commercial real estate is experiencing a very robust economic recovery. For the past two years it’s been “doomsday” predictions, yet we are seeing a quick bounce back. Owners, managers, and operators are projecting rent growth in the double digits and are already seeing this change now.  

However, rent growth cannot continue much longer, especially with rising interest rates. While rent growth is great short-term, you will need another safety net beyond rent growth in order to deliver the expected results in returns.  

The Great Resignation 

Another large facet of your commercial real estate portfolio is your people, and now it’s especially important to retain your workforce and see to it that your employees are happy. In CRE, it’s been especially difficult for organizations to fill the open positions they have. Not only that, but they’re worried about their current employees leaving. In January 2022, 4.3 million people quit their jobs, matching the all-time record set in November 2021. Today, 44% of your organization is looking for a new job. As startling as that statistic is, there are other statistics that point to why this is the case. 56% of employees want higher pay, particularly in the face of rising inflation rates. However, another 20% say they would take a new job with the same pay as long as they were able to receive other benefits such as flexibility, healthcare, and time off. This trend will continue well into 2023, and you must make sure you have a plan in place to stay ahead of it.  

The Quants Are Coming

Real estate analysis has tremendous potential for your organization. Quants, or quantitative analysts, are flocking to real estate because of the abundance of data, but finding quants with a deep understanding of real estate is difficult. The good thing is, strong partners in technology can help close the gap.  

8-out-of-10 real estate organizations are hindered by legacy technology systems, which negatively affect their progress and ability to innovate by trapping their data and making it impossible to access. Quants need high-quality, easy-to-access data in order to accurately determine the spread between the historic growth of an asset or portfolio within a market and the differential with the pricing valuation in order to predict future value. To do this more efficiently, quants need the appropriate tools and technology to access, store, process and analyze this data to uncover hidden opportunities that they may have in their organization.  

Check out our webinar to learn what Anne suggests are the best practices for navigating the rapidly changing market and making sure your portfolio can weather this “perfect storm.”