• Sun. Aug 7th, 2022

Commercial real estate will not fully rebound until 2023, at

MIAMI, May 24, 2021 (GLOBE NEWSWIRE) – Despite signs of a faster-than-expected return to the office in the United States, the commercial real estate industry is unlikely to rebound for two to three years, according to Philip Blumberg, the CEO of American Ventures which recently launched its fifth real estate fund since 1992. Perceived risk is the key and the reason why it usually takes a lot longer to recover from declining real estate markets than it takes to get in, he said.

“Getting back to ‘normalcy’ will depend on how quickly tenants feel confident enough to renew or expand the space,” said Blumberg. “The tenant uncertainty will likely take longer to resolve, which will lead to lower rents and lower valuations for a period of time. It will take at least 24 months for companies to fully decide what they want to do.

Based on past lows in commercial real estate, Blumberg expects office investment to increase in 2023 or 2024, which will inflate prices and attract even more capital. In such a scenario, he plans to unwind his portfolio – under construction – from 2026 or 2027. Mr. Blumberg’s American Ventures funds have performed well by acquiring class A office assets in troubled markets. Over 16 years, their average annual return to investors, net of fees and expenses, is around 18% (based on fund audits).

“As always, valuations will be driven by debt and equity flows in the sector, which remain low due to the perceived high risk,” Mr. Blumberg said. “Deprivation of significant private equity will keep selling prices low – which is the axiom behind my investment thesis for the new billion dollar American Ventures Strategic Property Fund. “

American Ventures is looking for Class A office buildings valued at over $ 50 million but priced below replacement cost – with a particular focus on Sunbelt states like Texas and Florida.

Mr. Blumberg sums up his thinking as follows:

  • Values ​​and rents have fallen sharply over the past year. They won’t be coming back right away as selling prices and valuations have also dropped sharply.
  • Until values ​​stabilize and start to rise, only distressed funds / buyers will invest.
  • The dislocation / relocation of tenant companies adds to the complexity of the view of the capital markets of the office sector. Tenants are still unsure of future space plans after the Covid-induced recession.
    • Many tenants remain concerned about the vulnerability of offices and retail businesses to future viruses – one of the reasons the property management arm of American Ventures is implementing “healthy building” guarantees.
  • Ultimately, it is the amount of capital (both debt and equity) pursuing investments that sustains prices.
  • The increase in capital allocations entering commercial real estate will not begin significantly until several years later.
  • A few Class A office buildings are starting to sell for below replacement cost – a trend that is expected to accelerate over the next few months, creating a self-sustaining cycle of more market pressure on homeowners.

Mr. Blumberg, widely regarded for his market forecasting, has a long history of raising investment capital, buying distressed commercial real estate and selling before demand slows down. In 2006, much publicized, he predicted the Great Recession. By 2008, Mr Blumberg had sold his national real estate portfolio – consisting of Class A office buildings in the nation’s Sunbelt – with most of the holdings selling for record prices.

The recent launch of the American Ventures Strategic Property Fund aligns with Mr. Blumberg’s investment approach – forming funds shortly before or during market lows. For the past 30 years, he’s built provident funds just before or in the midst of virtually every major economic downturn.

For more information on American Ventures, visit https://www.amvepart.com/pages/Home.cfm.

Media contact:
Sean healy
[email protected]

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