Real Vision: Finance & Investing Finding Value in Commercial Real Estate
Dec 16, 2023
Zac Goodman, a commercial real estate investor, discusses the potential value in the troubled real estate sector. They explore the impact of rising interest rates, the shift to hybrid work, and the challenges of repurposing older buildings. They also discuss the current state of the market, the role of ESG in real estate investing, and express optimism for finding an equilibrium.
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Market Correcting, Not Bursting
- The commercial real estate market is undergoing correction, not a bubble burst like 2008.
- The rise in rates impacts real estate more directly than corporate America, adjusting prices accordingly.
Triple Challenges in Office Real Estate
- The office real estate market faces a triple whammy: higher rates, hybrid work, and ESG-related obsolescence.
- Flexible landlords adapt and thrive while lower-quality properties suffer from these combined pressures.
ESG Drives Real Estate Obsolescence
- ESG regulations are forcing significant upgrades to most UK commercial properties or obsolescence.
- This is creating market friction, cost inflation, and delays in redevelopment due to sustainability goals.