At a time of uncertainty, investors in CRE are paying more attention to portfolio diversity

CHICAGO, ILLINOIS (January 5, 2023) - According to WealthManagement.com, investors are feeling more cautious and stress-testing their holdings for different scenarios during what have become uncertain times. As higher interest rates and inflation created more anxiety among commercial real estate investors over the past year, they are placing more importance than ever on portfolio diversification.

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The U.S. is currently experiencing an economic environment that, in some ways, is more disruptive and more difficult to plan for than the Great Recession, said BJ Feller, a managing director and partner at Northmarq, a provider of capital solutions for the commercial real estate industry. Back then, all headwinds pointed to a pullback in liquidity and the challenges could be easily understood.

Today, investors are dealing with fears about a potential recession, high capitalizations costs and an economic environment that’s shifting the way different asset classes have performed in previous decades, Feller added.

“Right now, there’s this dynamic and scenario that’s formed that’s caused investors to question everything, including the diversification of their capital holdings in probably a way they’ve never had to do comprehensively before,” Feller noted. “Some of the planning and diversification is more front and center and on a six-to-12-month horizon. But some of it is on a five-year, 10-year and multi-decades horizon.”

Other topics covered include:

• Greater focus on diversification
• Outlook for 2023
• Asset classes in favor

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