Fortune Favors Early Movers in America’s Property Crunch

With commercial property values plummeting 21% since interest rate hikes, a prime opportunity for private investors looms.

Fortune Favors Early Movers in America’s Property Crunch

With commercial property values plummeting 21% since interest rate hikes, a prime opportunity for private investors looms.

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Good morning. With commercial property values plummeting 21% since interest rate hikes, a prime opportunity for private investors looms. Meanwhile, multifamily construction costs are finally slowing down, and fewer deals are repricing.

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Market Snapshot

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*Data as of 3/28/2024 market close.


Fortune Favors Private Investors in America’s Property Crunch

With commercial property values plummeting 21% since interest rate hikes, a prime opportunity for private investors looms.

Taking the lead: Private investors, notably high-net-worth individuals and family offices, have stepped up accounting for 60% of U.S. commercial real estate transactions in the past two years. This marks a significant uptick from their historical average of 46% post-global financial crisis. Meanwhile, institutional investors have receded, contributing to only 18% of deals, deterred by previous losses and liquidity constraints in their private equity holdings.

Why it matters: The trend underscores the advantage of being nimble and less constrained by the need for committee approvals or short-term returns. Private buyers, with their long-term outlook and ability to act swiftly, are positioned to capitalize on the downturn. Following the global financial crisis, private investors dominated U.S. real estate, making 54% of purchases in 2009. Values bottomed out in Q2 2010, rewarding early buyers with a 9% annual return over a decade, vs. the 4.5% returns of those who waited until 2013 for the market to recover.

Lessons from the past: Bold investors like Blackstone made big bets following the GFC acquiring tens of thousands of foreclosed homes in 2012, a decision that greatly paid off. Similarly, RXR invested $4.5 billion in U.S. office spaces between 2009 and 2012, doubling its capital despite the market's uncertainty and the initial gamble of buying properties occupied by major banks like JP Morgan during financial turmoil. Despite the current ambiguity surrounding office space vacancy, the high rewards of investing in downturns are clear. 


Making the most of it: Large funds are currently hamstrung by $3.2 trillion in immobile private equity assets due to a slow dealmaking and IPO market, delaying investor returns. As institutions wait longer to get their money back and re-enter the property market, early private investors will have already secured most of the prime deals. Echoing Warren Buffett's counsel to "Be fearful when others are greedy, and greedy when others are fearful," the question arises: Is the current level of fear in the market a signal for opportunistic buying?

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✍️ Editor’s Picks

  • Minnesota maverick: Minnesota attorney Doug Miller's push for fairer real estate practices led to a $400M settlement, changing agent payment rules.

  • Shifting sands: According to MSCI's capital trends report, government agency funding rose significantly to 26% in 2023 from 19% in 2022.

  • Where Brooklyn at? Developer Michael Stern is facing foreclosure for Brooklyn’s tallest tower, 9 DeKalb Avenue, after defaulting on a $240M loan.

  • Federal musings: The cautious Fed hints at rate cuts but also warns of ongoing systemic risks, keeping Treasury yields higher than expected.

  • Sky-high living: NYC’s mayor aims to create new residential districts with higher density, targeting Midtown, Lower Manhattan, and Brooklyn. Good luck with that.

  • Against all odds: Despite what many have been saying now for years, the U.S. economy continues to hum along as the stock market hits new all-time highs. Is this a ‘no landing’ situation?

  • Re-ranking metros: The AFIRE Survey reveals that the top U.S. cities for investment in 2024 are LA, DC, Seattle, Dallas, and NYC, with 84% of investors bullish on U.S. real estate.


  • Bigger, more luxurious: Branded luxury condos in South Florida are on the rise, commanding a 15–20% premium, with brands like Ritz-Carlton and St. Regis capitalizing on demand.

  • Debt dilemmas: Multifamily debt in Chicagoland surpasses $240M, with Torchlight and Strategic Properties among the many entities struggling with rising interest rates on loans.

  • Multifamily misery: The U.S. multifamily sector is grappling with $3.46B in overdue loans, 43.1% more than in the previous quarter, or an 81.2% YoY increase. Charge-offs rose to 0.11%.

  • Condos for the cool kids: Bosa switches its high-rise plans from 400 apartments to condos in NYC’s East Village due to a saturated market, with better ROI expected.

🏭 Industrial

  • Thirst for expansion: Coca-Cola (KO) plans to relocate its bottling arm from the current Waco, TX warehouse to a larger facility.

  • Battery boom: South Korea’s LG Energy Solution accelerates its $5.5B battery complex construction in Queen Creek, AZ, with support from U.S. Realty Advisors.


  • Kroger closes doors: Kroger (KR) will close 3 online fulfillment centers in Texas and Florida, leading to the end of its delivery services.

  • Strategic shake-up: Kimco (KIM) sells 10 former RPT Realty properties for $248M, totaling 2.1MSF, and well surpassing its initial $67M investment.

  • Shopping success: Airport Square, a 187.25KSF shopping center in Toledo, OH, sold for $11.9M to a Las Vegas investor.


  • Office shake-up: Amazon (AMZN), with a 33.8% office vacancy rate, plans to reduce vacancies to 10% in 3–5 years, aiming to save $1.3B.

  • Oakland ouster: A Miami investor defaults on a $364.5M loan for Oakland office buildings worth $494.3M, leading to a lender takeover.


As Construction Costs Moderate, Fewer Multifamily Deals Are Repricing

Multifamily development deals are seeing fewer repricing instances, with a noticeable downtrend alongside lower materials price growth.

By the numbers: According to the National Multifamily Housing Council (NMHC), the number of deals repriced upwards has dropped to 13% in the current quarter, down from 48% in September and 23% in December. Conversely, deals repriced downwards have doubled to 52%, while 27% of respondents noted no repricing. Average repricing, which once climbed in previous quarters, has now dipped by 1%.

Material price fluctuations: Construction material prices have been showing signs of moderation. In particular, key components such as electronic finishes and roofing saw price growth of just 1%, electrical components surged by 4%, insulation grew by 2%, and lumber remained stable. Developers have adapted to these changes by altering designs, changing purchasing schedules, and exploring alternative suppliers.

Responding to change: For different material categories like exterior finishes, lighting fixtures, and roofing, multifamily developers have adopted diverse approaches, like using alternative brands or suppliers, changing product types, making design modifications, adjusting purchasing schedules, and focusing on escalation clauses. Notably, certain components like electrical panels and items with chips showed higher levels of alterations.


Positive outlook: The first quarter of 2024 marks a period of optimism for the multifamily development sector. With material prices stabilizing and fewer deals being repriced, the industry is showing signs of resilience.


Public policy groups explored the pandemic's impact on downtown areas. Collaborating, the University of Toronto and UC Berkeley tracked mobile data across 62 North American cities, comparing activity from early 2020 to mid-2023.

Las Vegas saw a complete recovery, leading all cities. In contrast, downtown areas in Washington, D.C., and Ottawa underperformed, with activity levels at 69% and 82%, respectively. Financial districts in Toronto and New York were among the lowest, with Toronto at 70% and New York at 66%.

Despite these findings, other studies indicate a rising trend in office attendance, suggesting a slow but ongoing downtown resurgence.

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