January Conference 2023 - Recap - DBRS Morningstar Recap

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A lot can happen in 12 months. To be sure, the macroeconomic environment is much different now than when CREFC last held its January conference in the beginning of 2022, a year that presented several major challenges. Interest rate hikes, Russia's invasion of Ukraine, inflation, and the corresponding halt in commercial real estate lending left many in wait-and-see mode. And more than 2,000 market participants, a record, registered for the 2023 conference to see what the new year might have in store. Read the full piece.

The second day of the conference began with the Industry Leaders Roundtable. It was a real cornucopia of market participants from all reaches of the industry, bringing together lawyers, lenders, regulators, real estate managers, investors, issuers, special servicers, and rating agencies, among others. Most panelists believe a recession is likely in the next six months, but the attitude about the industry was mixed. Some were unsettled and cautious about the current environment, namely rising interest rates and unclear office valuations and capitalization (cap) rates. Others believe selective opportunities are available. Panelists also disagreed on if there is enough liquidity available in the market. Finally, hope for lower interest rates in the near term appears to go against what the Federal Reserve is indicating.

Other panels touched on themes revolving the state of capital markets, Miami’s growth, what to expect from the federal government and how it may affect commercial real estate, and challenges market participants face in the current environment. Read the full piece.

The conference's final day began with a panel on multifamily and affordable housing. Multifamily has remained an attractive property type for investors, especially when the other asset classes have been having difficulties. Despite rent growth starting to slow down, the fundamentals for multifamily properties are still solid. On the other hand, the conversation around office finally came to a head at the second-to-last panel at the conference. The panelists themselves were split 50/50 on whether they prefer a hybrid approach to work or being in the office full time. This just proves that flexibility is important, and not every employee—or office tenant—is going to want the same thing. The last panelist discussed if there is anything left to lend on, but the panelists believe there are few available lenders because many are still in discovery mode for what the new normal is since the financing landscape has changed so much. Panelists also agreed that the lending ecosystem won’t be restored until the securitization market comes back. However, conventional fixed-rate conduit CMBS was created for stabilized assets and is less ideal for this environment where many fewer properties are stabilized. If the market is relying on traditional CMBS, it might be waiting for a long time. Read the full piece.

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