16 REAL ESTATE FORUM NOVEMBER/DECEMBER 2018
As the CRE business prepares to enter a new year, a number of new possibilities
are emerging for investors looking to shift strategies and rebalance their portfolios
2019 Investment Outlook
By Erika Morphy
On a quiet afternoon in October, the Treasury Department released long-awaited proposed rules that answered some of the pending questions many investors had about the
Opportunity Zones established under last year’s tax overhaul.
With that bit of bureaucracy out of the way, the floodgates
opened. Interest in these new tax incentives was, and remains,
intense and potential investors were clamoring for analysis and further insight into what the rules could mean for them.
“Investor interest has been insatiable,” says Derek Uldricks,
president of Virtua Capital Management. Earlier this year, even
before the proposed clarifications were released, the firm was
among the first to launch an Opportunity Zone fund.
A FRESH TAKE ON AN OLD STORY
As 2018 rolls into 2019 the investment picture for commercial
real estate in many ways will remain the same. Industrial, espe-
cially properties that serve e-commerce operations, remains red
hot. Multifamily, while its supply side is shifting a bit, is still con-
sidered a stalwart category. Retail, as exemplified by Sears’ bank-
ruptcy, will continue to struggle, except for those retailers that are
establishing new business models and an omni-channel presence.
These categories will continue to flourish as CRE investment, in
general, remains on the rise. For the first half of 2018, global CRE
transaction volume increased 13% year-over-year to $341 billion,
according to Deloitte’s 2019 Commercial Real Estate Outlook.
There is no reason to think this trend won’t continue for at least
the first half of 2019.
At the same time, new types of properties and developments are
coming to fore that will provide additional avenues for investment
in 2019. Opportunity Zones are just one example. Adaptive reuse is
another, as are industry clusters outside of traditional life science
and biotech space that are beginning to develop in secondary markets. Also on that list is anything that takes advantage of the disruption that high tech is delivering to real estate.
Deloitte’s outlook goes so far as to suggest that these newer
opportunities may be more ideal for investors nowadays. “Investors
seem to realize that their investments should be tied to the changing nature of work and tenant preferences,” according to the firm’s
analysts. “As such, the new capital commitment is unlikely to flow
entirely into traditional commercial real estate.”
OPPORTUNITIES NE W