Despite Market Turbulence, Now May Still Be A Smart Time To Invest In CRE
Growing economic uncertainty and talks of a recession have many investors hitting the pause button, but there are reasons for those in the commercial real estate investment sector to remain optimistic no matter where the economy may be heading.
An analysis by Origin Investments found that over the course of three economic crises — the recession of the early 1990s, the dot-com bubble burst and the Great Financial Crisis — real estate investments performed better than other investments that are often considered low-risk, including Treasury bills.
Dwight Dunton, CEO of Bonaventure, a vertically integrated real estate private equity firm, agrees that despite the current economic headwinds, it is still a smart time for investors to look into CRE — as long as they are cautious about their investments and have the right partner by their side.
Bisnow spoke with Dunton to learn more about where he thinks the market is heading, why he still believes in the strength of the CRE market and what Bonaventure is doing to help support its clients during these challenging times.
Bisnow: Why do you believe that now is still a smart time to invest in CRE?
Dunton: Commercial real estate is a broad asset class. It covers the four main groups of office, industrial, retail and multifamily, but it also covers a variety of subclasses. With that in mind, I don’t think it’s a good idea to invest in CRE in the aggregate, but it is a really good time to continue to invest in certain sectors. You have to be selective — it’s an asset picker’s market. If you are very selective there are great opportunities, and if you write off CRE as a whole right now, you will be missing out.
Bisnow: What advice do you have for investors who are nervous about the current economic climate?
Dunton: There’s always a next recession on the horizon. That’s a fact, so if you are going to be an effective commercial real estate investor, you need to have assets that are enduring, that will go through the next recession to the next expansion, whether a recession starts tomorrow or in three years. This is opposed to simply being an asset trader, where you have to time the market perfectly and get in at the bottom and get out of the top, otherwise, you can get wiped out.
The best advice I can give to investors is to invest long-term and make sure you have a conservative capital structure. So, whenever the next valuation downswing comes, you're able to continue to hold that asset and ride it out because CRE has largely continued a long-term upward trend in terms of wealth creation.
Bisnow: How is Bonaventure helping clients navigate the current market?
Dunton: We help investors buy great assets that we’re assuming for low fixed rates that reduce risk tremendously. We have long-term, below-market financing, helping other investors who are hoping to execute a 1031 exchange and needed a unique solution. We’re also assisting investors who may have a transition in their ownership group where some partners want to leave and others want to stay and we help facilitate that transition.
We’re in the business of solving complex real estate problems and providing solutions through standard products and ones custom-made for a client’s specific needs.
Bisnow: What is your investment forecast for the next six months? How will Bonaventure support clients as the market continues to shift?
Dunton: There will be continued uncertainty that will manifest itself as market dislocations. We will continue to find long-term, compounding, effective solutions and be active participants in the market, executing transactions when others are unwilling because of a lack of visibility on where the market stands.
This article was produced in collaboration between Studio B and Bonaventure. Bisnow news staff was not involved in the production of this content.
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