CRE Analyst

New direction with our annual New Year predictions: Rather than calling market trends, we bottled up insights and created a quiz to help you predict how you will compete vs. your peers in the new real estate cycle. More challenges and complications. Fewer tailwinds. More losses. ...but bigger opportunities for outperformers.

Forget supply and demand. Follow the capital. Best predictor of real estate returns? NOT supply growth NOT population growth NOT rent growth NOT NOI growth Instead... BBB corporate bond yields 90%+ correlated to UIRRs. i.e., real estate has been an indirect bond trade ever since interest rates began their structural decline in the 1980s. Core real estate, in particular, has been priced as a high-yield alternative. When capital floods in, values rise. Bond yields drop. Real estate returns follow. Does the money behind buildings matter more than the buildings themselves? Sam Zell would roll over in his grave at that suggestion. “The recovery of the market will be slow and painful. The monetization of the currency that previously bailed out real estate excesses will not appear this time. Success or failure will accrue to those who have focused their efforts on the basics… The HP jockeys of the scientific real estate community will be replaced by the traditional real estate professional who has learned his trade in operation and not in projection.” A $10 trillion question... Will the future look anything like the last 40 years? Cap rate compression may be over. Now what? Sam's prognostication was wrong in the 1980s, but who would've predicted rates going to zero? With ZIRP a distant memory, he may be right after all. But at least for the last 40 years, it's been all about capital. PS -- Capital is critical, which is why every FastTrack module starts with a deep dive into “the nine building blocks of the real estate balance sheet.” You must be able to "follow the dollars," but we still (and always will) spend time on fundamentals. Leases. Rents. Supply. DM us if you want to review the upcoming cohort syllabus.

Most asset classes are more fragile today than they were two years ago. CRE might be the exception. To be clear, it’s not because fundamentals are strong (they aren’t). But unlike much of the market, real estate already took its medicine. Private market values are down ~20% since early 2022, and REITs have underperformed the S&P by ~30 percentage points over that stretch. While other sectors chased AI-fueled momentum, CRE was resetting to a new cost of capital. That pain may now be an advantage. ...especially considering that new supply—long the Achilles’ heel of this industry—is finally in check. And as the broader economy looks shakier by the day, CRE enters this phase less extended than most asset classes. It may not be a haven. But it’s not expensive. And in this environment, that matters. As strange as it sounds in a world defined by macro volatility, commercial real estate may slowly be making its way back, at least in relative value terms. Sometimes, being out of favor is a better starting point than being over-loved. PS -- We kick off every FastTrack course with a deep dive into capital markets because real estate follows the capital. In moments like this, it’s critical to know how to follow the dollars. If this sounds interesting, DM us to learn more about the upcoming cohort.

12 underwriting pitfalls. Where have you seen costly mistakes? ---- Background ---- We're working on a case study covering rent comps and market analysis. How do investors underwrite post-renovation multifamily rents? We drop our students into investors' shoes and want to include tips on common pitfalls... ---- 12 Rent Comp & Underwriting Pitfalls ---- 1. Taking asking rents at face value Quoted rents aren’t collected rents. Always adjust for concessions. A “free month” on a 12-month lease is an 8% haircut you can’t ignore. 2. Assuming "renovated" means the same everywhere One property’s “renovated” might be new paint and lights; another’s could be a full-gut. You need to know what was actually done—or you’ll underbuild or overpay. 3. Ignoring finish level differences Rent follows quality. If your comp has quartz counters and stainless appliances, and yours has carpet and laminate, you’re not playing in the same league. 4. Forgetting that location still matters—even within a submarket School district lines, grocery access, street traffic, or just being on the wrong corner can mean a $150/month swing. Zip code comps don’t cut it. 5. Letting the highest rent set your target The top end of the comp set is often aspirational. Don’t build your plan around the hero number. Underwrite to what you can actually achieve and lease. 6. Not watching occupancy and leasing velocity A comp getting $1,750 isn’t helpful if it’s 89% occupied or took six months to lease up. Always ask: at what speed and with what kind of stickiness? 7. Ignoring rent per SF when it doesn’t fit the story Rent per unit tells one story. Rent per square foot tells another. You need both to make sense of how comps stack up—and where your asset really fits. 8. Assuming concessions are temporary Some discounts are structural. If everyone’s offering waived fees or free parking, chances are you will too. It may not go away after lease-up. 9. Trusting broker data without verifying Broker OMs are a great place to start but they’re designed to sell. Call the comps. Walk the properties. Get the real story behind the numbers. 10. Forgetting property taxes go up with NOI If your plan is to raise rents and push value, expect the assessor to notice. Don’t assume taxes stay flat after renovation. Budget for the reassessment. 11. Overlooking unit mix and size A comp with smaller units will show higher rents per foot, but lower rents per door. Don’t benchmark blindly. Understand what you're adjusting to. 12. Treating rent potential like a formula Rent isn’t just a math problem. Be honest about what your team can actually get done. Experience matters. ---- Advice or feedback? ---- What tips would you add, takeaway, or modify?

Mergers, multiples, and acquisitions in this week's Quick Hits!

Transcript from hundreds of calls this morning... Borrower: we've reviewed last week's term sheet and are ready to lock! [Translation: base rates have plunged, let's lock it in!] Lender: I'm going to have to go back to committee. [Translation: expect a 'refreshed' spread.]

🚨 Want to learn about CRE Analyst's skills programs? Join us next Friday for a live info session on FastTrack, our flagship training program for hungry professionals who want to build real-world skills and accelerate their career. Whether you're aiming for the next promotion, prepping for a transition, or just tired of missing out on opportunities you know you could handle — we'd love to meet you! ✅ Get your questions answered ✅ Meet our team of seasoned CRE professionals ✅ Find out if you can benefit from the program ❌ No pressure, no pitch. We're here to help you see if this is the right fit for your goals. 👉 Register Now through the event link Spots are limited! Don’t settle. Invest in yourself & learn the skills to create your own success. #CRE #CommercialRealEstate #CRECareers #CREAnalyst #InvestInYourself #FastTrack #RealEstateEducation #CRETraining

“Globalization has created this interlocking fragility. At no time in the history of the universe has the cancellation of a Christmas order in New York meant layoffs in China.” Nassim Nicholas Taleb

Dear fund manager, are you: (a) Too big to fail (b) Too small to die, or (c) Too stretched to survive The investment management industry is consolidating. Fast. -- Founders are aging. -- Capital is scarce. -- Investors prefer the biggest players. -- Fees are compressing. -- Performance is slipping. There are roughly 350 active U.S. real estate investment managers. The top 50 control ~$3.5 trillion. The top 10 manage more than the next 40 combined. We expect 30% of managers to go away and the top 10 pulling even further ahead. Sound familiar? History may not repeat itself but it often rhymes. ---- Banking led the way ---- 40 years ago, there were 14,000 banks. Today? Fewer than 4,000. We looked back to see what this shakeout might reveal about where investment management is heading. The patterns might surprise you. ---- History's lessons ---- 1. Too big to fail Big banks rarely went under. With access to capital and cheap funding, they typically survived by buying other big banks, not by stitching together small ones. 2. Too small to die The number of small banks declined by 90%, but they rarely failed. Where'd they go? They grew. Small banks often became big banks. Niche strategies. Local focus. Organic momentum. 3. Too stretched to survive Midsized banks = danger zone. They took more risk. They lacked clear focus. They weren’t big enough to acquire or small enough to survive on their own. 1 in 5 failed—a rate double that of their larger or smaller peers. ---- Implications for investment managers ---- If you're small: grow or graduate. If you're big: buy or be bought. If you're midsized: brace for impact. Entire industries don’t consolidate like this very often. But when they do, the outcomes aren’t random and they’re not always what you’d expect. PS -- You can’t navigate your career if you don’t understand the key players, how they're shifting, what they do, where they sit, and how they get paid. That’s why the first module in our FastTrack curriculum breaks down how the real estate system actually works. Next cohort kicks off May 7. DM us if you're interested.

Would you rather have a 20% IRR or a 2.0x multiple? Most investors say “both.” But let’s be honest: IRR gets the spotlight. Why? -- Easy to track -- Easy to benchmark -- Fits neatly into consultant reports -- Drives promotes for GPs -- Drives bonuses for LPs ---- Red flag 1 ---- Higher IRR ≠ more money A 20%+ IRR on a 1.5x in 2 years feels great. But a 2.0x over 5 years quietly creates more wealth to the LP. Some LPs (e.g., endowments, sovereign wealth funds) opt for total return over speed. To them, how much you make > how fast you make it. ---- Red flag 2 ---- Higher IRR = more risk IRR-based thinking encourages short holds, quicker flips, and risk-taking. Here's a realistic example... Fund I: crushed it Fund II: also great Fund III: solid Fund IV: ...meh Fund V: still raising money By the time performance softens, capital momentum is locked in. How many fund managers would say no to re-ups from those early funds? Or to new money rolling in thanks to the prior funds' outperformance? Not many. ---- No silver bullets ---- In our FastTrack program, we break down real estate return metrics—IRR, multiples, equity yield, and more—so you know when to use each one and why it matters. We also negotiate JV promote structures so participants understand how incentives shape behavior. DM us if this sounds interesting. May 2025 cohort is enrolling now.