Trends Watch: Real Estate Investing

EisnerAmper’s Trends Watch is a weekly entry to our Alternative Investments Intelligence blog, featuring the views and insights of executives from alternative investment firms. If you’re interested in being featured, please contact Elana Margulies-Snyderman.  

This week, Elana talks with Matthew Sandretto, Managing Director, Prairie Hill Holdings.

What is your outlook for real estate investing? 

Real estate is an enduring asset class that always does well and has outperformed all others when measured over long periods of time.  With this in mind, we think the outlook is rock-solid; however, there are some challenges on the horizon in the short-term.  Market participants have become accustomed to expansionary monetary policy over the past decade, which drives secular increases in asset prices that go beyond rental growth and other fundamental factors.  The current shift to restrictive monetary policy, even if temporary, is a major adjustment.  Our view is that this shift will slow down transaction activity but will only push prices down temporarily; the reason being is that there is such a high demand for space and in many markets, construction has not kept up, so despite higher interest rates, rents will remain strong, which will support pricing.  It would really take a large recession to dampen these factors and we don’t foresee that happening. 

What are the greatest opportunities you see and why?

We see a lot of generational turnover happening in the marketplace with properties getting passed from one generation to the next.  Real estate for years was thought of as a “family business” and we are seeing that often those who inherit aren’t really interested in managing a portfolio, even with professional management in place.  Often these heirs want to liquidate.  That creates opportunity for us because we are in the accumulation phase and are building a portfolio for the long-term.  Often these sellers don’t wait for perfect timing either. Once they have decided to sell, they are going to sell, even if market conditions are suboptimal.

What are the greatest challenges you face and why?

The greatest challenge has to be related to people -- the “war” for talent and labor availability in general.  These are challenges for all organizations; however, it is acutely felt when an organization like ours is growing.  The situation underscores the need for good leadership and having an organization that people are excited to be a part of.   Talent was never a replaceable commodity, but today, organizations that don’t manage talent well are at risk of failing.

What keeps you up at night?

There is a level of instability both within the U.S. and internationally that makes it very difficult for investment managers.  Whether it is COVID-19, war in Europe, potential conflict in Asia-Pacific, supply chain issues, etc., it is one shock to the system after another.  Despite all that, business goes on and we believe very strongly that while others might be paralyzed by fear, those who can find ways to press on and make progress every day will be rewarded for their efforts.   

The views and opinions expressed above are of the interviewee only, and do not/are not intended to reflect the views of EisnerAmper.