Grant Cardone Unveils Real Estate Alchemy: Turning Fear Into Fortune
Real estate mogul Grant Cardone believes successful people use fear as motivation.
"When you push past your comfort zone you are forcing your brain to create new pathways," Cardone wrote in a LinkedIn post in August. "When you start taking new actions at new levels, you will experience fear. Nothing about that is comfortable."
Fear and greed are the two emotions believed to drive markets, whether it's stocks, housing or commercial real estate, and a recent survey by John Burns Research & Consulting captures the sentiment of industry insiders in the multifamily, industrial retail and office sectors.
The Fear and Greed Survey, a collaboration between Burns and CRE Daily, found that commercial real estate investors are still more greedy than fearful, although many have hit pause.
The survey found that 28% of commercial real estate investors are increasing their exposure now while 23% are decreasing it. Nearly half said not changing anything is the best thing to do because of financing challenges and market volatility.
Although investors have hope for the broader commercial real estate market, office investors are pessimistic, with 40% decreasing their investment exposure, according to the survey. They blame remote/hybrid work, slow hiring or layoffs and higher interest rates.
With interest rates remaining high and more downside risk, Burns expects distressed opportunities in 2024 and 2025, particularly in the office and oversupplied multifamily markets, as the market adjusts to higher capital costs.
"Low transaction volume has obscured the extent to which values have fallen, but owners cannot avoid the realities of the market in perpetuity," said one Texas investor who participated in the survey. "Over the next 12 to 24 months, values will fall more abruptly than they have since the Fed began tightening monetary policy."
Office Space Quandry
Because of difficulties in getting financing, declining values, rising vacancy rates and the high volume of maturing loans, office landlords will face many challenges for the foreseeable future.
Lack of demand is affecting the amount of office space under construction. Nearly 31 million square feet of new office space started construction in 2023 — slightly more than half of the starts seen in each of the previous two years, according to CommercialEdge.
"All eyes are on maturing loans and what happens with these buildings," said Peter Kolaczynski director of CommercialEdge. "We anticipate this being the beginning of functionally obsolete office buildings' removal from the marketplace."