As the commercial real estate market continues to thaw after a challenging period, advisors and investors are closely attuned to shifting dynamics. See which key trends are in sharp focus for the executive team here at Caliber—these are the critical drivers we believe are shaping the current investment landscape and creating new possibilities for wealth creation and preservation.
“Big Picture” Market Trends
Looking through the widest lens, we see four market-wide factors as particularly influential:
- Political sea change delivers a clear mandate – We begin 2025 with both houses of Congress and the president in alignment, poised to move in a clear direction for the next four years. Because President Trump was in office once before, we already have a good idea of what the direction entails, which supports a positive environment for real estate investment and the private sector at large. The leadup to the election was difficult for fundraising, but now that investors are seeing a clear direction, many are feeling more confident and willing to invest.
- Interest rate environment creates buying opportunity – Interest rates have stabilized and generally declined. If the government achieves its cost reduction goals, that should take pressure off inflation and further allow the Federal Reserve to reduce rates and reinflate asset values. It is equally important to recognize that the magnitude of the recent decline in commercial real estate values is similar to what we experienced during the global financial crisis—and if we have reached the trough, now is the time to buy. We are experiencing an opportune entry point for real estate, whereas the previous two years were perhaps better suited to selling or staying on the sidelines.
- Manufacturing reshoring drives real estate demand – The ongoing trend of reshoring manufacturing operations to the U.S. is creating significant implications for commercial real estate. This shift requires substantial infrastructure investment, including large-scale industrial facilities, warehouses, and supporting infrastructure. Regions with existing manufacturing momentum, particularly in states like Arizona, Colorado, Texas, and select Southeast markets, are well-positioned to benefit from this trend. These areas combine favorable business environments with manageable living costs that support workforce development.
- Ongoing importance of tax-advantaged investment opportunities – The current regulatory environment continues to favor real estate as a tax-advantaged asset class. Two vehicles in particular merit attention from advisors and their clients: Opportunity Zone investments and 1031 exchanges. These strategies can offer significant tax benefits while providing exposure to real estate markets. For advisors, developing expertise in these areas can unlock substantial value within their client base, particularly when working with business owners and investors holding appreciated real estate assets.
Evolution in Private Equity Real Estate
The private equity real estate space is experiencing its own transformation, with two notable developments:
- Institutional-quality expectations – Investors are increasingly demanding institutional-quality platforms from real estate investment sponsors, regardless of size. This includes enhanced transparency, sophisticated reporting systems, and robust client portals. This trend is driving consolidation within the industry as firms realign to meet expectations.
- The next wave of alternative investments – As access to major brand-name sponsors becomes commoditized, advisors are seeking differentiated investment opportunities to enhance their value proposition. Exclusive access to specialized real estate investment platforms with limited capacity can provide advisors with a compelling competitive advantage in their markets.
Current Developments at Caliber
Within our own firm, three things stand out:
- Hospitality investments – Because of our unique positioning and knowledge within the hospitality sector, we were quicker to be affected by pandemic-related issues but also quicker to react: We could sell good assets at the right time and not overpay during the runup in asset pricing over the last few years. We are now aggressively re-entering the market and looking for new investments as prices have come down. Many of our peers did not take the same approach; in fact, many invested when prices were high.
- Demand for income – Our investors are demanding more income from their investments. In response, our 1031 exchange solutions and Core+ Growth & Income Fund are focused on income-producing investments to support retirement income goals.
- Monitoring costs – The cost of construction is still elevated. Caliber is reacting by investing in manufactured affordable housing and seeking to build with alternative materials—including modular formats—to lower the overall cost of construction. In Mesa, Arizona, for example, Caliber worked with ZenniHome to implement an innovation solution to the housing shortage with factory-built model homes that were easily transported and stacked into configuration.
Eyes on the Horizon: Taking a Longer Perspective
If we extend the time horizon, we see three factors that warrant careful monitoring:
- The power of AI – We continue to be curious about how AI can help a company like ours. How can AI make a high-performing team even more capable? How can a smaller, boutique player like Caliber win with AI?
- Shifts in consumer behavior – We are observing an interesting shift in consumer behavior, whereby people want the experience of living in an apartment blended with the experience of living in a hotel. People are seeking “lifestyle” developments that mix apartments with a gym and grocery store, for example. How can Caliber leverage the lessons learned in our hospitality investments to create more compelling residential assets?
- The enduring appeal of real estate – In a world where everything is changing to a large degree and changing quickly, the investment landscape can feel unstable—especially when we think about the winners and losers created by the powerful yet relatively unknown force of AI. Real estate, however, remains a constant factor; we will always need places to live, work, and play. Preferences may shift, but we have the flexibility to reconfigure or otherwise adapt assets to meet evolving needs. We see the stable, enduring nature of real estate as particularly appealing to investors in today’s era of rapid change.
Caliber’s Advisor Resource Hub
To learn more about real estate investments and Caliber’s approach to wealth generation, visit our Advisor Resource Hub or contact our team today.
About Caliber (CaliberCos Inc.) (NASDAQ: CWD)
With more than $2.9 billion of managed assets, including estimated costs to complete assets under development, Caliber’s 16-year track record of managing and developing real estate is built on a singular goal: make money in all market conditions. Our growth is fueled by our performance and our competitive advantage: we invest in projects, strategies, and geographies that global real estate institutions do not. Integral to our competitive advantage is our in-house shared services group, which offers Caliber greater control over our real estate and visibility to future investment opportunities. There are multiple ways to participate in Caliber’s success: invest in Nasdaq-listed CaliberCos Inc. and/or invest directly in our Private Funds.
Investor Considerations
The information contained herein is general in nature and is not intended, and should not be construed, as accounting, financial, investment, legal, or tax advice, or opinion, in each instance provided by Caliber or any of its affiliates, agents, or representatives. The reader is cautioned that this material may not be applicable to, or suitable for, the reader’s specific circumstances, desires, needs, and requires consideration of all applicable facts and circumstances. The reader understands and acknowledges that, prior to taking any action relating to this material, the reader (i) has been encouraged to rely upon the advice of the reader’s accounting, financial, investment, legal, and tax advisers with respect to the accounting, financial, investment, legal, tax, and other considerations relating to this material, (ii) is not relying upon Caliber or any of its affiliates, agents, employees, managers, members, or representatives for accounting, financial, investment, legal, tax, or business advice, and (iii) has sought independent accounting, financial, investment, legal, tax, and business advice relating to this material. Caliber, and each of its affiliates, agents, employees, managers, members, and representatives assumes no obligation to inform the reader of any change in the law or other factors that could affect the information contained herein.
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