The Real Estate Capital Scoreboard® – December, 2021

Chicago, Illinois, December 1, 2021 – COVID continues to dominate world headlines. The news of the fresh Omicron variant resulted in a 2.5% drop in the stock market during the Thanksgiving holiday. Benchmark interest rates tumbled about fifteen basis points in step, with the stock market decline after steadily climbing much of the month based on inflation fears.

As the pandemic continues to keep interest rates low, real estate investing remains challenging. Lenders and borrowers alike maintain large cash stockpiles, maintaining pricing extremely competitive on nearly all types of realty assets. So, where are the opportunities for investing in this sector? Some areas include the following:
Workforce Housing: Older, more management-intensive workforce housing based on affordable rents still provides some profit opportunities. Investors should expect heavier capital investments on an ongoing basis. In return, overall investment yields in the teen range still are attainable.

Localization: Investors continue flocking to Sunbelt markets. As a result, more opportunities abound for smaller, local ventures in the Midwest and other less glamorous markets. Yield premiums of fifty to two-hundred-basis points or more can be had.

Small-scale: Institutional investment capital chases the highest quality, core assets of $20 million or more. Meanwhile, mid-size deals of $5 to $10 million attract substantial interest from local and regional firms. However, smaller investments below the $5 million thresholds still present less efficient markets for investors to capture additional yields, sometimes above 400 basis points.

The Real Estate Capital Institute’s director, John Oharenko, advises, “Some of the most attractive realty investments include smaller, local workforce housing. Investors with strong local presence and efficient property management capitalize on such opportunities.”

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