MBA CREF 23 Market Overview

Market expectations for continued interest rate hikes are prevalent, but lenders have new allocations and need to put out capital.

Morale remains positive for 2023 Q3 and Q4. Multifamily and industrial continue to be a preferred asset for lenders. Student housing and self-storage are in high demand for the coming year. Home mortgage rates are sitting at about 6% and discouraging home buyers, thus pushing them to multifamily properties or the rapidly growing SFR build-to-rent space. Retail has made a comeback since 2020- especially grocery-anchored and open-air, well-located strip centers with “daily needs” tenants. Restaurant spending is up as consumers gravitate to well-located “experiential” retail.

Hotels are making a huge comeback after covid years with the return of leisure travel and increased spending on vacations. Business travel is finally picking up, although below pre-pandemic levels. One lender remarked that for the first time, hotels may be passing office in product type desirability. Office metrics continue to present challenges as the industry fundamentally reimagines what the office looks like. Lenders are very wary of standalone office. Office utilization is still at about 55% across the nation and there will be stratification within the product type. Highly amenitized office properties and suburban locations (shorter commutes) will outperform many downtown locations. Life sciences and medical office are in demand. We will continue to see the conversion of office to help meet the national need for residential units. Along with the multitude of debt platforms we heard about, many capital providers introduced JV equity and co-gp arms.