If the goal is for long-term investments, I would say to diversify your portfolio. Do not just focus on one particular asset class, market or location.
What do you recommend for a long-term strategy for commercial real estate investing?
We are interested in long-term opportunities that will stand up in five or 10 years, an investment that can withstand rising interest rates, trade wars and political chaos. For a long-term approach, which asset classes would you recommend? What regions of the United States would you recommend? Should we be looking at ground-up opportunities or the purchase of existing assets?
My opinion and based on our experience, hospitality investments usually are our favorite long-term investment (i.e. five to 10 years). Second option multi-resi are also on top of the list.
As a longtime real estate lawyer and not an economist or experienced investor, I may not be the best person to respond to this question. That said, my nearly 40 years of experience doing large transaction in our Gateway cities has led me to draw several conclusions from my vantage point. Those who do best investing in real estate generally have a long-term investment horizon rather than a short-term, high-risk/high-return approach that has a lot of execution risk and requires excellent market timing to permit a well-timed exit. Especially for foreign investors who are not as able to be hands-on and deeply knowledgeable in the local markets, I think it best to invest in well-located real estate in strong markets, with strong demographics (population and other demand drivers being strong) that are attractive to millennials and future workforces, a business-friendly environment and a workforce that supports leading economic trends and local businesses. In markets that meet those criteria, I would focus on traditional asset types such as multi-family and in the nearby areas, appropriate investments in logistics, student housing, senior living and other assets that take advantage of demographic and structural trends. The key is not to overleverage, as in times of distress in the markets, leverage is what causes loss of assets. Low leverage should allow investors to ride out tough times and benefit in the long term, as real estate gets its best results over the long term.
This is a very broad question. For a long-term strategy, I would look for opportunities with long-term financing that you can purchase and keep the financing in place, or acquiring an asset where you can fix the interest rate. No one can predict political or economic dislocations, and certainly no one can time events perfectly. You need to focus on a location with stable government and, I think, an asset class with which you have experience or comfort. You also have to remember that assets age, technology advances, and that you may need to face changes as the opportunities shift. Construction has the greatest risk, but also the greatest potential for upside. Do you have the capital to take such a risk? The connections or venture partners to help you move forward? Today, people are talking about growth in Nashville, Tennessee, and Columbus, Ohio, as well as other growing cities. Some, like San Francisco, have too much going on. Others, like Austin, Texas, have developed a technology base and are attracting young workers, but seem to have cooled off. One growth center is some type of senior housing and adaptive healthcare as American baby boomers are aging. I'd start with a sense of direction and goals and move from there.