Sabina Reeves, chief economist and head of insights and intelligence at New York-based CBRE Investment Management, sees specific opportunities within the global commercial real estate markets. The firm is taking an especially close look at what is going on in the residential and residential-related markets.
The firm’s underlying commercial real estate market focus has not changed, with Reeves highlighting modern logistics, residential in a variety of formats, next-generation student housing, senior living and self-storage as keys of interest. Within those sectors, CBRE IM sees specific niches.
“With the private market dislocation, we might see a situation in which a next generation student housing property is finding the financing markets hard, and we can go in and buy a position,” said Reeves, speaking with Real Estate Capital USA earlier this month at MIPIM, the global real estate conference held annually in Cannes.
The firm also believes listed real estate is oversold, a factor which was true last year and continues to be so this year, Reeves said. “Our third bucket of interest is in credit positions which are attractive at this point in the cycle, particularly areas lower down in the capital stack,” she added.
“We are trying to take advantage of where we think things are mispriced and the markets in which the mispricing is the greatest,” Reeves said.
With a global mandate across debt and equity, Reeves highlighted a market which is seeing different strengths and weakness.
The Asia-Pacific region had a positive start to the year because of the faster than expected reopening on China. “Within the UK, the US and Europe, we are seeing more visibility in pricing that makes it feel like it is possible to start looking at opportunities again. At this point, the UK feels like the most interesting from a pricing perspective,” Reeves said.
The firm is watching central bank activity across markets closely as well as recession indicators.
“At the start of the year, it felt like we had narrowly escaped a bigger recession. We even thought it was looking like the debt markets were starting to normalize in the two weeks prior to the banking shocks. While the Federal Reserve and the ESB were quite hawkish, the banking situation has unraveled that,” Reeves said.
While the macro outlook is very similar to where it was in January, Reeves noted a slightly less hawkish outlook from the Federal Reserve in the wake of the bank failures is likely a good thing for commercial real estate. “It feels like the situation was a specific issue and the Federal Reserve stepped in and did quite a lot to ringfence it,” she added. “In Europe, we are watching the ECB closely for the impact of the rate hikes.”
The biggest question, however, is when the markets will start to reboot. “When will we reach the bottom and when will interest come back?” she said.
The firm is seeing concerns which vary by region, with Reeves noting the sustainability agenda in Europe is tackling how the market could reshape the built environment.
The office sector is in the eye of the storm, with the focus being on the quality of a building and how it can either be repurposed or amenitized into modern offices. “That is where you have the biggest range of views,” she said. “In the US, the big conversation is around the future of office and there are many of these assets that are very old and resilient to change.”