5 Trends to Watch

As we approach the new year, here are five things in commercial real estate that individual investors should keep an eye on:

1. Discount Chains Seize the Moment

Retail is proving its resilience, with discount chains leading the charge in adapting to today’s economic challenges. Ollie's Bargain Outlet, Inc. recently acquired a number of Big Lots locations, expanding to 546 stores across 31 states. This strategic move reflects a broader trend where value-oriented retailers are thriving in an era of cautious consumer spending. These businesses are capturing market share by addressing the rising demand for affordability without compromising accessibility.

For investors, this could signal an opportunity to look beyond traditional retail investments and focus on stable, income-producing properties. Discount-anchored retail spaces are often insulated from the volatility that impacts other segments of the market. Evaluating these types of assets as part of a diversified portfolio could yield both defensive and growth-oriented benefits. We recently had an opportunity from O’Connor Capital in North Charleston, SC, for a grocery anchored center, and we will look to partner with them again in the near future.

2. Fed on the Mind

The Fed cut rates by a very expected 25 bps. The market reacted fairly pessimistically, not because of the cut, but rather because of Fed Chair Powell’s forward guidance on the path of rate cuts. Expectations are still for two cuts in 2025, but this all depends on how unemployment and inflation develop, the two mandates for the Fed.

Other rates in the bond market have been rising for the last month with the 5- and 10-year Treasury yields at around 4.5% each. Even with rates rising, we are still seeing good deal flow here at EquityMultiple. Many markets are bottoming and offering attractive real estate in strong locations.

3. When's the Right Time?

The U.S. commercial real estate market is attracting renewed attention as valuations stabilize and yields reach their highest levels in over a decade, as reported by Commercial Observer. Multifamily and industrial assets are particularly compelling, supported by robust demand fundamentals and long-term growth prospects. Investors are finding that the current environment provides a rare confluence of reduced valuations and attractive returns across multiple asset classes.

This trend invites a deeper consideration of strategic deployment. Those with capital to deploy in sectors benefiting from structural tailwinds—like housing affordability challenges and supply chain optimization—may find compelling opportunities. However, as always, due diligence and understanding localized market dynamics will remain crucial in realizing these potential gains.

4. Optimism with a Cautious Eye

The Michigan Consumer Sentiment Index reached a new high for the year in December, reflecting greater confidence in the economy’s current state. However, underlying concerns about inflation and future economic pressures suggest that optimism is tempered by a sense of caution. Consumer spending, while resilient, may not be immune to broader macroeconomic headwinds.

This duality presents both challenges and opportunities for real estate investors. Essential-service properties, such as grocery-anchored retail and workforce housing, may continue to see strong demand. At the same time, investors should remain attuned to how evolving sentiment might affect discretionary sectors like hospitality or luxury retail. Diversification and a keen eye on consumer behavior will be key to navigating these dynamics.

5. MicroStrategy x Bitcoin

MicroStrategy , a prominent business intelligence firm, has made headlines with its substantial investment in Bitcoin Inc. Between December 2 and December 8, 2024, the company acquired an additional 21,550 bitcoins for approximately $2.1 billion, bringing its total holdings to 423,650 BTC, valued at around $41.5 billion. This aggressive accumulation underscores a growing trend among corporations to adopt digital assets as part of their treasury strategies.

This move reflects a broader shift in how companies manage their balance sheets, with digital currencies like Bitcoin being considered for diversification and as a hedge against inflation. MicroStrategy's approach has sparked discussions among other corporations about integrating cryptocurrencies into their financial strategies. However, this strategy comes with risks, including market volatility and regulatory uncertainties. Investors should weigh these factors when evaluating companies with significant digital asset holdings.