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The Next Major Hurdle for CRE Asset Managers: Climate Change

Asset management focus

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Franco Faraudo & Holly Dutton
October 17, 2024

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Propmodo Focus

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Real estate asset managers have faced significant challenges in recent years, with rising interest rates being the foremost. The increased cost of capital was exacerbated when regional banks across the country withdrew from the lending market, making loans even harder to obtain. While private lenders stepped in to originate much-needed loans, their speed and flexibility came at a cost.

Now, with the Fed beginning to lower interest rates, lending appears to be returning, even though many commercial loans remain at pre-cut rates. CBRE’s Lending Momentum Index rose 4.3 percent in the second quarter of 2023, driven by banks reentering the market, while alternative lenders, particularly debt funds, stayed active. The multifamily sector also benefited from increased loans from government agencies like Fannie Mae and Freddie Mac.

Despite the optimism, asset managers still face concerns. Recent hurricanes in the Southeast have forced them to reassess risk calculations for natural disasters, and these increasingly frequent events are likely to further drive up property insurance costs in affected states. There is also worry that disasters could trigger a mass exodus from states like Florida, which is still enjoying a population boom that began during and after the pandemic.

Falling interest rates are making real estate more attractive again, as yields on risk-free investments like treasury bonds drop. A record amount of “dry powder” has been sitting idle, and some of it now seems poised to be invested in real estate.

The road ahead for commercial real estate is uncertain, but some of the hazards present since the onset of the COVID-19 pandemic have diminished. It remains to be seen whether those rushing back into the asset class will secure the best deals or if they would have been better off waiting for the crash that many thought inevitable just months ago.

Now, let’s dig in!

The Next Major Hurdle for CRE Asset Managers: Climate Change

Commercial real estate asset managers face new challenges as climate change increases the frequency and severity of natural disasters like wildfires, floods, and hurricanes. Adapting to these risks is essential for protecting property values, mitigating financial losses, and meeting investor demands for climate resilience.

READ ONLINE: https://propmodo.com/the-next-major-hurdle-for-cre-asset-managers-climate-change/

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Navigating the Data Maze: The Evolution of Real Estate Asset Management

Real estate asset managers are struggling with outdated manual data management processes that hinder decision-making and increase errors. The industry is moving towards automation and real-time insights to improve portfolio performance, enabling faster responses to market changes.

READ ONLINE: https://propmodo.com/navigating-the-data-maze-the-evolution-of-real-estate-asset-management/

Insider Insights

Alt control
The alternative asset manager Ares has purchased the real estate investor GCP for $3.7 billion, doubling the size of their real estate portfolio.

Powder hounds
Goldman Sachs has raised one of its largest pools of capital with its new $3.4 billion fund that will target investment in private real estate funds.

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