Key Points
Investors Turn to Commercial Real Estate Debt Amid Volatile Market Conditions
A growing cohort of investors are shifting their focus to commercial real estate debt investment as a way to navigate the current high interest rate environment with lower volatility. Traditional real estate investment trusts have been facing pricing fluctuations, while residential property yields are squeezed by soaring purchase prices. In response, commercial real estate debt is emerging as a viable alternative, offering exposure to the property market without the challenges of ownership.
According to a new white paper by Zagga titled, ‘The Power of Private CRED: Why the time is NOW’, investors are increasingly turning to private real estate lending to access property exposure with reduced volatility. Zagga’s chief executive, Alan Greenstein, highlighted the attractiveness of becoming a lender in the commercial real estate sector, given the higher interest rates and margins compared to traditional property investments.
The rise of commercial real estate debt comes amidst a global trend towards private debt as an asset class, with private debt assets under management expected to nearly double in the coming years. The Zagga paper emphasizes the unique value proposition of private lenders compared to traditional banks, particularly in assessing complex borrowing needs and structuring tailored deals.
Greenstein also pointed out the significance of commercial real estate debt in addressing the housing shortage in Australia. With low housing approvals and construction starts, coupled with a robust population growth post-Covid, there is a pressing need for more housing supply. Private, non-bank lenders play a crucial role in facilitating property development by providing access to capital.
To learn more about commercial real estate debt and download the white paper, visit the Zagga website. Zagga, an Australian boutique investment manager and non-bank lender, specializes in private credit real estate investments. With a focus on mid-market loan sizes and a track record of delivering stable, risk-adjusted returns, Zagga has attracted a diverse investor base from around the world.
As investors seek opportunities in the evolving real estate market, commercial real estate debt is emerging as a strategic option to navigate the current economic landscape and capitalize on the potential for higher returns with lower volatility.