June 9, 2023

AMA: Should investors be worried about commercial real estate?

Head shot of Matt Malone, head of investment at Opto Investments
Real Estate

Key takeaways

  • Our Head of Investment Management, Matt Malone, sees two major concerns in US commercial real estate (CRE).
  • First, a more systemic concern from the rapid rise in interest rates presenting refinancing challenges for existing owners. Second, an acute concern in the office space.
  • It is, however, important to note that the office sector represents only 15% of the CRE market, while strong performance from CRE owners more broadly over the last decade should have put many in a good financial position to weather the storm.
  • In addition, lenders have generally been more disciplined since the Global Financial Crisis, lending at lower loan-to-value ratios and with higher debt service coverage ratios.
  • Refinancing risks for legacy properties should present interesting opportunities for private funds to deploy in CRE debt, while opportunistic RE funds should be positioned to scoop up good properties with distressed balance sheets.

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Important disclosures

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