These are the top two opportunities in the market today!
As usual this time of the year we’re having conversations with our investors to build their 2025 strategy together.
Here is our take on the economy and the direction things are going in the next few years and at the end I will also share what I believe are the top two opportunities in the market today.
The market is definitely reacting to the election’s outcome with overall positive sentiment. Stocks are exploding, indexes are breaking records and interest rates are dropping.
Canada’s central bank lower the rate (one of the biggest cuts they had in a while). The European central bank did the same this week and most analysts I’ve been talking with are positive that the US Fed will do the same and cut rates again in the upcoming meeting.
Another interesting curveball that came from talking with local DFW lenders was that they now have construction loans available at around 7.x% Yes, mid-7’s for a construction loan! I was surprised as well. Obviously, not all lenders do that, but they have a few that do and that’s a game changer!
So, what are the top two commercial real estate opportunities in 2025?
First in my opinion is new construction! 6 months ago, I’d tell you to stay away from it but with everything above converging at the end of 2024, new construction projects starting in 2025 will be ready for occupancy in about 18-30 months and will have a new, ready product, just at about the time the economy will be (hopefully) recovered and hungry for more. Neighborhood Retail, Flex in core urban locations and multifamily in areas that are not overbuilt (harder to find these days) will be the winners.
The other top opportunity in 2025 is assets with NNN leases that are 2-3 years long and have annual rent increased built into them. Specific, yes, but important! We see these in assets classes like Neighborhood Retail, Flex in core urban locations and some single tenant investment assets. These assets are trading at a 6.5%-8.5% cap rate range. Going in at that rate, coupled with NNN leases that grow every year, will be a winning combination when cap rates compress again (regardless if it takes 2,3,5 or 10 years to get back there…)
That’s just my opinion, and where we plan to deploy our 2025 investments funds in.
Agree? Disagree? Want to join us? Drop a comment below!
