If you were to write down the combination of factors to create the ideal scenario for value-add investing, it would look remarkably similar to what we see in today’s markets. The alignment of deep repricing, intense liquidity pressures, the need to bridge the debt financing gap, a progressive regulatory environment, a reduced supply pipeline, evolving structural mega-trends and the loosening of interest rates have created a distinct opportunity for investors ready and able to deploy capital into real estate.
This window provides access to opportunities often unavailable or prohibitively priced during other phases of the cycle.
However, like all good things, these optimal conditions will end reasonably rapidly. Investors must be swift and decisive to capture what we see as a highly attractive buying opportunity in a new cycle. In our most recent DWS Strategic Outlook, we showed yields compressing quickly once market liquidity improves, potentially falling even faster than models predict. Although opportunities will always remain, those that drive the highest returns will be more difficult to uncover.
Don’t play checkers when the game is chess.
The board might be the same, but the game has changed. In the aftermath of the Global Financial Crisis (GFC), a “simplistic” value-add strategy was to let the markets do most of the work as opposed to actively enhancing the value of the asset.
Read the full ‘Thought Leadership’ article at the link below
Supporting documents
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