Where Are the Greener Pastures?

Where will the herd move next? I was catching up with a peer of mine in the commercial real estate (CRE) field, and our conversation centered around this critical question.  Where is the herd (or the money) going now, and more importantly, where will it turn next? As we dove deeper into the discussion, we each found ourselves arguing (perhaps quite selfishly) that commercial real estate, and specifically in Texas markets, presents a lot of green grass.

Institutional and private capital has been stampeding toward a consistent set of primary strategies. Private Equity remains a popular vehicle, especially private credit as it has been growing 14.5% annually and is now a multi-trillion-dollar market. Fixed Income has provided appealing risk-adjusted returns as interest rates increased, with monthly bond fund net inflows in the tens of billions. Public equities, and specifically technology/AI focused ETFs have seen ongoing headline driven surges. Infrastructure, multi-family, industrial and data-center CRE investments have experienced steady inflows through multiple waves of investor interest.

Yet many of these strategies are showing weaknesses. Private equity distributions have slowed dramatically, leading to historic surges in sales on the secondary markets. Private Credit is awash with competitive capital still waiting for the wave of distressed assets to materialize, while drawing increasing regulatory attention. Declining interest rates will reduce the appeal of Fixed Income for many investors.  The question of whether Public Equities are overvalued is a constant talking point, and Corporate America is facing their own debt maturity wall that they will have to grapple with. Even popular niches like AI demand-driven data centers are facing mounting challenges as a speculative asset class.

While the herd crowds into private credit and data centers, or sits on the fixed income sidelines, CRE in Texas Submarkets present greener grass for opportunistic capital. TEKMAK Development’s near-term focus remains on suburban hospitality investments, but the economic and demographic tailwinds in Texas present an equally appealing opportunity in multifamily, retail and even offices in suburban markets. As the herds turn over the coming years, also looking for more open pastures, these opportunistic investors will find themselves in prime position.  Especially as the distant thundering hooves of retirement capital begin their march into alternative assets, including commercial real estate.