Hodes Weill’s Top 10 Observations (not facts) for 2018
FACT [fakt]: A thing that is indisputably the case; the truth about events as opposed to interpretation
Reading global real estate markets and making investment decisions did not get any easier since we presented our last annual market observations. 2017 was a year in which seemingly every morning's Twitter feed identified yet another Black Swan that could materially upend investment strategies, markets and entire governments.
Seriously, how excited could we get about cap rates and capital flows when nuclear taunts were flying back and forth across the sea? Not only has the exceptional become the norm, the coverage of news itself has become exceptional. After all, 2017 was also the year in which we learned about the existence of "alternative facts." In a world that can accept alternative facts, the need for trusted sources is more important than ever. Against this backdrop, Hodes Weill will continue to strive to provide our views and observations in an unvarnished and balanced fashion.
Stepping back from the drama in the world of politics and global diplomacy, the past year was a fairly predictable and consistent one in the world of private equity real estate. Most investors maintained their strategic focus on real estate, increasing exposure where appropriate and taking chips off the table selectively. At this point in the cycle, we are witnessing behavior that we believe demonstrates the appropriate level of prudence given the overall (if uneven) state of recovery in global real estate markets. Caution continues to be the order of the day, despite some larger, newer entrants to the market that are aggressively building portfolios. It is a difficult task to nimbly grow portfolios at a time when market values are advancing well beyond the peaks reached before the financial crisis of 2008, now a full decade past. It is, therefore, not surprising that capital flows to private real estate (both direct and indirect) are down from prior peak years. In some respects, it is notable that in the 10th year of recovery, investors have not moved to the sidelines.
And so, amidst a complicated global geopolitical environment and a long-dated real estate market recovery, we are pleased to set out our annual Market Commentary. We hope these observations are helpful and very much look forward to hearing your feedback.