Exercising Caution In Today's Capital Markets

Investors are playing it safe in the current environment, but CRE remains a relationship-driven profession and that still leads to new opportunities, experts say.

Properties are overvalued in general in today's market, according to Ares Management managing director Jay Glaubach.

He said his firm has been staying away from office and focusing on apartments and industrial. Ares Management has value-add and opportunistic funds. Those opportunistic funds look for 18% to 20% returns.

Kearny Real Estate Co. partner Hoonie Kang said his company is very bullish on industrial. LA County enjoys the largest, strongest industrial market anywhere in the country, according to Kang.

As far as capital is concerned, there has been more of a gravitation toward safer plays, according to Glaubach.

He said overseas investors are especially wary of what is happening with the new administration — and with good reason. Some of the focus with investors has also been on Europe and what is going to happen with the euro.

Invesco managing director Peter Cassiano said Invesco focuses on experience, geography and business plans when it comes to looking at operators.

"Real estate is still very much a local business driven by relationships," Cassiano said.

Glaubach said it is important for his firm to have some runway for doing more deals together because there is a lot of time and energy that goes into documenting the first one.

"It's important to know that there's at least some runway for more business going forward, so you can actually build the type of relationship with a new group that we have with our existing groups," Glaubach said.