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Is commercial property reaching the end of its cycle?
Wealthy investors are choosing to sit on their money rather than invest in “fully priced” commercial real estate, suggesting the asset class may have reached the peak of its cycle, a property investment specialist says.
Is commercial property reaching the end of its cycle?
Wealthy investors are choosing to sit on their money rather than invest in “fully priced” commercial real estate, suggesting the asset class may have reached the peak of its cycle, a property investment specialist says.
Property investment firm Forza Capital says its high-net-worth (HNW) clients have started selling property assets “which they feel are fully priced as the cycle reaches its peak”, noting headlines from several publications have reflected this.
“In late 2016, we started to receive more and more feedback from our family office and HNW clients, that they felt the cycle was very toppy,” Forza Capital director Adam Murchie said.
“Many of them advised that their cash holdings were at the highest proportion of their asset mix for some time. However, they indicated they were comfortable with this because it gave them firepower when the next cycle presents.”
Mr Murchie said high-net-worth investors tend to be at “the forefront of market cycles” and typically pick the high and low points of each cycle “quite accurately”.
He said these investors were “still motivated” to acquire strategic assets, but these assets would need to meet “very strict criteria” before an investment is made.
“These investors do not feel a need nor do they have a requirement to be fully invested at all times. As such, they remain patient and use investment fundamentals as their guiding light for investment decisions.”
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