Cash Flow Net Worth by Guardrail Finance
1 idea per week related to CRE Finance and Investment
Every Monday, we discuss 1 idea that can increase both your cash flow and net worth through real estate financings and investments.
Background
Guardrail Finance is both a financial intermediary for multifamily and commercial real estate loans and a Sponsor of real estate equity syndications.
Real Estate in Flux
I reviewed a number of reports last week trying to gauge what's happening both in the real estate financing space and also in the real estate investment space. With the Fed deciding not to lower rates and with data showing a slowing economy, we are likely to continue seeing headwinds for real estate related to valuations, finance-ability, and absorption rates for the foreseeable future.
Retail Real Estate Faces Headwinds
The retail property sector is experiencing challenges, with a net loss of nearly six million square feet in Q1 2025—the weakest leasing quarter since the pandemic began. Major bankruptcies and inflation fatigue among consumers have led to decreased demand for store spaces, particularly affecting shopping centers when anchor tenants like Big Lots close. WSJ
Multifamily Market Shows Resilience Amid Challenges
Despite elevated interest rates and a surge in new supply, the multifamily housing sector is poised for growth. Developers are projected to add more units than at any time since the 1970s, with most new supply concentrated in the Sun Belt and Mountain regions. This is expected to elevate the average vacancy rate to 4.9% by year’s end, accompanied by an average annual rent growth of 2.6%. CBRE
Institutional Investors Reassess Real Estate Allocations
Institutional investors have increased their target allocations to real estate by nearly 200 basis points since 2013. However, according to Cohen & Steers, institutional investors are shifting their real estate allocations from private real estate vehicles to publicly traded REITs. The primary reason is for enhanced liquidity.
As of late 2024, actual allocations to real estate decreased to 10.2%, with nearly 50% of institutions reporting they are under-allocated, compared to less than 30% that say they are over-allocated.
Family Offices & Private Funds: Renewed Focus on Real Estate
- Increased Allocations - According to Knight Frank's 2025 report, 28% of family offices have increased their real estate allocations over the past 18 months, while 17% have reduced exposure. Direct real estate is now the third most common asset class in their portfolios, following equities and cash.
- Investment Strategies - Family offices favor opportunistic (32%) and value-add (30%) strategies, with a preference for medium- to long-term investment horizons. Approximately 34% prefer solo direct investments, 19% invest through funds, and 13% engage in joint ventures.
- Objectives - The primary goals for real estate investments among family offices are growth and capital appreciation (42%), wealth preservation (23%), and income generation (19%).
- Fundraising Surge - Private equity real estate fundraising rebounded in Q1 2025, reaching $57.1 billion, up from $32.5 billion in Q1 2024.
The tides are ebbing and flowing for real estate, but the underlying theme seems to be that money is available for the right deals. You just have to be positioned to benefit from both an equity and debt perspective, and to determine where it is best for you to be as an investor - private equity, public equity, and/or debt.
Best regards,
Robert Newstead
Navigating the Market with Guardrail Finance
At Guardrail Finance, we specialize in arranging financing on behalf of clients and in syndicating real estate investments on behalf of investors to help you capitalize on opportunities in multifamily, affordable housing, medical office, and industrial properties.
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