The commercial real estate industry, or CRE, has developed tremendously over the years. From new technology, market research and increased investment and development opportunities, the CRE industry has definitely grown. With this tremendous growth comes increased competition between brokers, investors, tenants, buyers and sellers. Our commercial real estate friends over at The Hightower Blog recently published an article on the topic. In this blog post, Hightower describes four ways competition is spicing things up in the CRE industry. You can read an excerpt of their article below, then click the green button at the bottom of the page to view the full post!
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Over the past 30 years, the commercial real estate industry has transformed from a “mom-and-pop” industry to an institutional asset class where owners manage massive, complex, and global portfolios.
Although this development is good news for many CRE professionals, it is not without its consequences. As more money flows into the asset class, competition has worsened across the entire industry.
Competition for Deals
The most significant rise in competition has been on deals. Over the past few years, billions of dollars — from institutional and foreign sources — have flowed into real estate and driven up prices for desired assets across primary, secondary, and tertiary markets. This flow of capital has far outpaced new construction and new development, leaving commercial owners in a classic supply and demand challenge: there are more dollars in the industry chasing each deal.
To handle this rise in competition for deals, many commercial owners have sought investors with deeper pockets, developed a clear specialization in their investment strategy, or sought secondary markets.
Competition for Capital
Many GPs are fighting a two-front war, feeling pressure on both the deal side and the fundraising side. According to a recent survey of owners across the industry, 67% of commercial owners feel that competition for investment dollars is increasing. Institutional investors are not cavalier with their money. They want to pick the firms with the absolute best yields. Limited partners are placing greater emphasis on better tools, real-time reporting and visibility into performance…