Institutional Investors Target Alternative Strategies

Earlier this month, the Federal Reserve increased its Effective Federal Funds Rate (EFFR) by one quarter of a percentage point, maintaining the rate in a target range of 5% to 5.25%. Continued rate hikes have impacted commercial real estate financing and by extension, CRE transactions.

But how will all of this impact institutional investor strategies in the area of commercial real estate investments? Experts talking with Connect CRE offered many points of view, with David Fletcher, Excelsa Properties’ Managing Director and Head of Acquisitions pointing out that “insurance volatility, and to a lesser degree, inflation uncertainty, remain overhangs” among institutional buyers.

The experts did indicate that institutional investors still involved in the CRE sector are adopting different approaches to financing their acquisitions. Grant Jenkins explained that the current interest rate environment means institutional investors are adopting a more proactive approach for their 2023 strategies.

“Many are opting for shorter-term fixed-rate financing options, rather than the traditional 10-year fixed-rate money,” said Jenkins, who is Managing Director of Staghorn Capital.