Real Estate Market Outlook From the Perspective of Family Offices
December 07. 2021
The coronavirus pandemic impacted humanity in an unforgettable way, and the economic toll is unimaginable. For instance, investment across the board dropped to historic lows as buyers and sellers retreated into a safe space to protect their capital. But, even then, it is safe to say that different sectors of the economy suffered differently.
For example, online shopping and videoconferencing saw record demand, and businesses raked in historic revenues as more people remained stuck in their homes. But, contrariwise, areas like real estate took a massive hit from the sudden decline in footfalls.
The real estate space is one of the economic sectors that took a massive hit from the pandemic, both in terms of revenue and development. However, one cannot readily make sense of the situation because of differences in magnitudes of effect to specific subsectors, unless one can access insights from knowledgeable observers.
For this article, we obtained invaluable insights from Nitin Shakdher, founder and CEO of Green Capital Single Family Office and Michael Karas, CEO of Karas Partners and co-moderator Brian DeLucia of Arrivato, who shared their thoughts during a MarketCurrents virtual event dubbed InvestorView: US Real Estate.
Granted, real estate, especially commercial assets, suffered immensely during the pandemic. However, an MSCI report shows the US market managed to squeeze in some gains in 2020, reaching $10.5 trillion. The global market was also on a growth trajectory, reaching $326.5 trillion in 2020, 5% higher than 2019.
The numbers suggest that real estate is the world’s most significant store of wealth. Interestingly, speakers reiterated this stark reality during a MarketCurrents virtual event dubbed InvestorView: US Real Estate. The event brought together three executive members of family offices spanning the United States and India, with MarketCurrents’ Managing Director Sumehr Sondhi being the co-moderator.
According to one speaker, Nitin Shakdher, founder and CEO of Green Capital Single Family Office, real estate assets took a massive hit during the pandemic, but the recovery is equally satisfying. His investments suffered more because they were more invested in commercial real estate – a space in which demand tanked when lockdowns came into force worldwide.
Interestingly, Nitin and Michael, the other speaker who heads a family office, agreed with the MSCI report (cited earlier) that the real estate market saw some growth despite the pandemic. As per Nitin, it was a jolly surprise to see footfalls in retail real estate. He, specifically, cited the case of Inditex, whose physical stores continued to see walk-ins even as people preferred to shop online more.
According to Pitchbook’s Q3 2021 Global Real Assets Report, the market for tangible assets is looking more positive than in years. A critical development responsible for the sentiment, per the report, is the passage of US President Joe Biden’s ambitious $1 trillion infrastructure package. Pitchbook anticipates the project to spawn several potentially lucrative opportunities for public-private partnerships.
Going by Pitchbook’s analysis, one wouldn’t quickly tell which real estate market sector will dominate in the future. But, thankfully, the issue was a topic that the speakers in MarketCurrents’ virtual event spoke of at length.
On his part, Nitin believes the outlook for commercial real assets is bleak. He draws the conclusion from his experience during the pandemic, where demand sharply shifted to residential and, partly, to retail real assets. Moreover, he sees more investors “gravitating towards equity-based real estate investing” to avoid the tax burden on tangible assets.
Michael was in agreement regarding the attractiveness of retail and residential real assets, adding that adopting the hybrid workplace model will play a critical role. The model, as he explained, entails employers allowing workers to come into the office some days and work at home for a few others.