Asset Classes, Markets, Operational Concerns: Bisnow Survey Reveals CRE Focus For 2024 (2024)

Each year,Bisnow’sEscapeandAscentretreats bring togethera hand-selected groupof commercial real estate leaders for four days of networking, deal-making and relaxation in Miami Beach. These retreats have led tomultimillion-dollar dealsand lifelong business connections, due in no small part to the curated attendee list of top owners, operators, developers and capital providers.

Last year,Bisnowcapitalized on the wealth of CRE knowledge at each retreat and conducted a market sentiment survey,in partnership with CohnReznick, to learn more about the asset classes and markets they are most interested in, the capital they need or have to deploy over the next two years, and the operational issues that are at the front of their minds. While some results were unsurprising, including a high level of interest in multifamily and industrial, some — including attendees' thoughts on distressed assets, retail and even office — were unexpected.

The themes in this survey — capital markets, geography, asset classes and the ever-evolving way organizations view their operations — highlight the movement within CRE today. To better understand and embrace this movement, investors, owners, operators, developers and communities are tuning in toCohnReznick's Movement Series, which can be found here. CohnReznick's integrated team of advisory, assurance and tax professionals helps real estate professionals optimize performance, manage risk and maximize stakeholder value.

During Escape and Ascent, held at the 1 Hotel South Beach from Nov. 6-9, 112 attendees took the survey. Their responses offered valuable insight into where CRE is heading in 2024 and beyond. The survey questions and responses are below.

Over the next 12-24 months, will you be primarily deploying capital as debt, equity or both?

Capital Markets

First, respondents were asked whether they identified as an owner, operator, developer or capital provider. Depending on how they responded, they were asked how much capital they would need in the next 12-24 months or how much they have to deploy in that same time frame.

Capital providers were then asked if the capital they planned to deploy was primarily debt, equity or a combination. More than 40% of respondents said both, with 37.5% saying they were focusing on debt and 21.9% on equity.

KEY TAKEAWAYS - Capital Markets:

• Equity capital is plentiful, in terms of groups having powder to deploy. But getting winning deals and getting them approved remains challenging.
• Regarding the capital stack, significant capital that had preferred an LP equity position is currently favoring debt, mezzanine or preferred positions.
• Distress funds are also plentiful, but true distressed deals areharder to come by than respondents expected.
• Significant private liquidity exists in the market, but yield profiles on most opportunities don’t match investor preference.
• Investors are selectively evaluating development opportunities that have the potential to achieve outsized risk-adjusted returns.
• Equity is still looking for distress/dislocation — not enough for equity to be wiped out, but debt has to take a hit too — when banks foreclose unencumbered by existing capital stack.

Ackman-Ziff Real Estate Group President Simon Ziff held his Coffee and Capital session at both retreatsand offered his expert insights into capital markets.

“I think what we learned from Coffee and Capital is what people are willing to look at for debt and equity and what they can win and get approved are two different things,” Ziff said. “The art of this business is quickly assessing what can get approved on the most strategic and favorable basis.”

Asset Classes

Next, attendees were asked which asset classes they were primarily focused on. Of all the options listed, the winner was residential/multifamily, which was selected by 78.7% of respondents. Industrial was the second-most-chosen category, with 40.7% of respondents citing interest in industrial assets. Commercial office was the least popular choice, with only 22.2% of respondents adding office to their list. A few respondents cited other asset classes that weren't listed here that they are interested in, including manufactured housing and self-storage.

KEY TAKEAWAYS — Asset Classes

• The multifamily and industrial sectors continue to be the focus for the majority of investors, with interest in industrial increasing year-over-year.
• Retail and hotel both got favorable attention, particularly with capital that, until recently, primarily favored multifamily.
• Office deals are getting done. While smaller deals are preferred over larger ones and the interest in office varies by market, the office market is far from dead.
• High-quality build-to-rent developments remain a major draw.

Geo Markets

Respondents were then given a selection of nine U.S. markets and asked to choose which ones they were most interested in. Here, the responses varied across the board, with 69.4% choosing the Carolinas/Nashville/Southeast, followed closely by the 55.6% percent who selected Texas, the 54.6% who chose Florida and the 53.7% who picked the Northeast Corridor.

KEY TAKEAWAYS - Geo Markets

• Everybody loves South Florida, and Miami, in particular, is enjoying its moment in the CRE sun.
• Southeast markets such as Nashville, Charlotte and Raleigh, North Carolina, remain high on developers’ lists, especially for those looking into multifamily and even some office.
• Interest in Southwest markets has waned slightly year-over-year, with several attendees citing overbuilt multifamily markets and challenges in industrial.

Operational Concerns

Finally, respondents were asked which of the listed operational concerns were top of mind for their organization. Based on the responses, data, analytics and reporting are a major concern for CRE professionals, along with outsourcing and cybersecurity and privacy.

These responses show that the CRE industry is preparing to hit the ground running in 2024, with a high level of capital ready to deploy in a wide range of markets and assets. At Bisnow's Escape and Ascent retreats, these industry titans had unparalleled opportunities to connect with other CRE leaders and start planning their next major deals.

Registration isopen for next year’s retreats.Apply here for Escapeandhere if you are interested in attending Ascent. You won't want to miss the opportunity to hear firsthand from CRE leaders about where they think the market is heading, their goals and the partners they are searching for to help achieve them.

This article was produced in collaboration betweenCohnReznickand Studio B. Bisnow news staff was not involved in the production of this content.

Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out tostudio@bisnow.com.