At NAIOP's CRE.CONVERGE, the virtual conference taking place this week, panelists from the industrial, office, retail and commercial real estate multi-family homes have spoken out in favor of investing in their respective sectors.
In a real-time audience poll, respondents named industry as the sector they were most likely to invest in. Much of the discussion, however, pointed to the positives that were mostly seen as a negative story for the other sectors up to 2020 in 2020.
Wade Achenbach, executive vice president, portfolio management at Kite Realty Group, said retail may be the sector everyone likes to hate, but that just means that it is at the end of a cycle that is about to rebound.
"The strip sector and the mall business have had problems for many reasons, and COVID has hit them the hardest, dramatically," he said. "If you just look at this trend, it will be short-lived. You have to be very careful what you see. There is no online retailer making money today and there has never been one."
"What really happens when someone says e-commerce? It's more of an omnichannel. Even Amazon recognizes the value of businesses with the purchase of whole foods," said Achenbach.
The old adage applies: buy low and sell high.
"I think there are more opportunities (in retail) than in any other sector," he said.
George Hasenecz, Senior Vice President, Investments at Brandywine Realty Trust, said on behalf of the office sector, which many have questioned given the home-to-work shift, that its past decline – as it is – has been mispredicted now.
“When you think of all of the economic events and social trends that have occurred, the dot-com bankruptcy, 9/11, the densification of the office and COVID, people have always said the office is dead. Office has always reinvented itself, ”said Hasenecz.
Working from home has been successful in responding to the crisis, but it is very difficult to work in a collaborative environment, he said
“How do you maintain your culture, hire and hire new employees? (Work from home) really goes against people's needs and wants to get together. We believe that a Class A office will be in great demand. Companies want to make sure their employees and their talents feel safe. There is still competition for talent and office space is used as a recruiting tool, ”he said.
A similar story is playing out in the multi-family sector, said John Drachman, co-founder of Waterford Property Company.
The pandemic has driven many people from dense urban areas to suburban apartment buildings. The trend reversal was strong in large markets such as New York, San Francisco, Los Angeles and Chicago, where vacancy rates are rising and rents are falling. A year ago, the main story in these markets was the lack of affordable housing.
As with retail and office, a broader perspective will benefit investors, Drachman said.
“People will return to urban areas. If you can endure a bit of pain, there could be great urban housing purchases in the long run. "
Rene Circ, Senior Managing Director and COO at GID Industrial and GID Investment Advisors LLC, spoke on behalf of the industrial sector which, to no surprise, seems strong.
He said that essentially there are very few people who don't buy things online.
"I would argue that too much capital is being devoted to apartment buildings and far too much to retail," he said. "Investors have to invest in industry."
The panel was moderated by Will McIntosh, Head of Research at USAA Real Estate.
Kathryn Hamilton is the Vice President of NAIOP