Three Winners for End-of-Cycle Real Estate Investing

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When looking at sound real estate investment strategies, National Real Estate Investor (NREI) recently talked with a private equity investor to see where he recommended putting money at the cycle's end. According to CEO of Virtus Real Estate Capital, Terrell Gates, there are some definite winners in the end-of-cycle investment game. BAM looked at the NREI article and where Gates thinks real estate investors may get the most bang for their buck.

 

In Multifamily the Winner Is...

 

Workforce housing carries the day in Gates's recommendations. According to the NREI piece, Gates notes that Class A as well as upgraded Class B have rents and occupancy which are down. Workforce housing, which is a solid market within the multifamily industry, is affordable housing for the middle-class working family. Gates points out that there isn't much new inventory, and demand guarantees occupancy as well as rental growth. He thinks that workforce housing is a bright spot in the multifamily market, although he notes that valuations are “frothy” and suggests caution there.

 

 

In Office Space the Choice is Clear...

 

Medical Office space comes away a winner. Gates points out that the question isn't demand but the valuations or what he clarifies as the cost of getting in. New supply is rare, he says, because there are existing barriers to entry that keep it that way. The small amount of new inventory isn't adding to existing space, but replacing older and worn out inventory. All this means rising occupancy, rents, and “overall positive trends” for these medical office assets.

 

 

Another Shining Star is...

 

Senior Living makes another appearance - and we've profiled it several times as a growing segment of rental life. Gates says that one sub-category - assisted living - makes for a “compelling investment category.” He notes that in the short term there is supply coming into the market due to the strong demand, but that the demand will continue – with any negative trends also remaining short term. Gates also says that we're still in the very early days of the demand for senior living, as baby boomers are only beginning to wade into the senior living market. As with medical office space, Gates says the question isn't demand but merely the price of admission (valuations).

 

These three among Gates's recommendations stand out, as workforce housing and senior living especially have shown a steady and reliable increase in both demand and rent potential in our own research. Investors should proceed with caution but these categories are some of the most-likely-to-succeed in the current climate.

Elizabeth Wheeler