INSTITUTIONS MAY BE EXPONENTIALLY LARGER THAN MOST
AVERAGE INVESTORS, BUT THEY FACE MANY OF THE SAME
CHALLENGES AS THEY LOOK TO PUT THEIR CAPITAL INTO PLAY.
YET THESE POWERHOUSES ARE FINDING DEALS—AND MAKING
THEM PENCIL OUT—DESPITE THE DIFFICULT CLIMATE.
By all accounts, investors of all stripes are facing an arduous playing field. A substantial uptick in interest rates late in 2016 brought transaction activity to a near halt during the beginning of this year, and further increases are surely on the horizon. Combine that with continued uncertainty over the direction of policies under the new administration—
from economic and foreign policy to healthcare and tax reform—and the level of uncertainty arguably remains on par with
the period before the election.
Despite these factors, the climate for acquisitions remains competitive. Pricing adjustments and cap rate compression
have not kept up with the usual trends, and there’s still a dearth of quality deals available at reasonable terms. Meanwhile,
lenders are continuing to be conservative in underwriting deals. For any investment, fundamentals and location are key, but
the exact details of what makes a good deal have changed.
These issues are only magnified for institutions, given the vast amount of capital they have to place and the shifting preferences of their fund investors. It is in this backdrop that decision-makers from seven of the world’s biggest institutions
came together to discuss the overall climate for commercial real estate and how their firms are adjusting to the current
reality. In some cases, strategies get injected with a dose of ingenuity. In others, the plan is to stay the course and hope for
the best. No matter the approach, one thing clear: with a collective $390 billion in real estate assets under management and
nearly $20 billion allocated toward real estate investment by year’s end, they have their work cut out for them.
Hosted by Real Estate Forum and Transwestern, the 21st Annual Institutional Investor Symposium took place earlier this
summer at the Langham Hotel in Chicago. An edited version of the session follows.
21st Annual Institutional Investor Symposium