Episode 1: Breaking Down the Market Cycle with Real Estate Veteran Mike Fascitelli

Published on Sep 12, 2023
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Over the last twelve months, market volatility, swift rate hikes, and a significant drop in lending have all contributed to a shift in the CRE cycle.

The post-COVID spike in residential property values has slowed, and newer long-term construction is more capital-intensive than before. Industry players are now asking, “What exactly is the current status of the market, and how do we proceed?”

Past downturns help us contextualize today’s environment. During the recession of the early 1990s, real estate’s slowdown was largely characterized by a problem of hyper-supply. The subprime credit crisis nearly eliminated CRE demand for a short period. In the current cycle, most activity – or lack thereof – may be tied to uncertainty and changes around interest rates.

While swings in the market have understandably created uncertainty, the good news is that every challenging environment in real estate presents opportunities for savvy operators to capitalize. Each downturn in our recent memory, including the Great Recession of ‘08, was followed by a cycle of booming returns.1

On the first episode of Cadre’s Real Estate of Mind podcast, Cadre Founder, CEO and Executive Chairman Ryan Williams sat down with Mike Fascitelli, the Chairman of Cadre’s Investment Committee and former President and CEO of Vornado. They discussed cycle shifts, the potential for price dislocations, as well as areas ripe for investment. Here, we’ll explore and expand on some of the concepts they discussed.

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Unpacking Uncertainty

Though we may not know how long or severe it will be, a shift in the CRE market cycle is underway. And any pronounced shift, particularly one that is more of a contraction, presents risks for asset holders and investors. 

While headwinds in the office sector are well-known, here are a few other themes that are worth noting:

Long-term residential projects

When high-profile bank runs hit the news in early 2023, regional institutions made an industry-wide determination to shore up their operations and reduce substantial lending programs.

Regional and community banks have almost uniformly tightened up their lending, directly affecting the commercial real estate sector. Long-term housing projects such as high rises and condo buildings have slowed down dramatically, finding fewer options to secure financing.2 With access to capital becoming more expensive, investors with exposure in these longer term residential assets may need to wait longer before seeing potential returns.

Hotels, regional malls, and projects with extreme up-front costs

In an environment where the general industry trend is more cautious and access to capital is more expensive, projects with high up-front costs are more risky. 

Newer hotel constructions may have a hard time accessing the appropriate capital. And regional malls will have the same issue, except with added concerns on the future of shopping and retail. These sorts of projects likely will be approved much less often than in the few years prior.

Opportunities, both Present and Future

At the end of his conversation with Mike, Ryan referenced the famous Warren Buffet quote, “Be fearful when others are greedy and greedy only when others are fearful.” 

The spirit of Buffet’s general advice rings true today as well. With real estate investors remaining cautious and unsure in this market, opportunities ripe for the taking may present themselves.

The market may be more moderate than in recent bull years, but competition both for land and for vying bids are likely to decrease as well. Savvy investors with an appetite for higher risk may find that the next 12-24 months will present a great time to find opportunities at a discount to recent pricing.


Cadre expects that more attractive opportunities will soon appear in multifamily. This asset class is traditionally stable and thus well positioned to continue maintaining its performance relative to  wider instability and uncertainty.

A significant demand driver for multifamily today can be traced back to affordability issues throughout the U.S. housing market. Interest rates have risen so sharply recently that new home purchases have become dramatically more expensive. Indeed, with these price increases, maintenance costs, and other expenses like property taxes, the gap between home ownership costs and rent costs has never been wider.1 Many Americans currently find themselves priced out of owning a home, which should drive more people to continue to rent.

In today’s inflationary environment, multifamily can offer a hedge against inflation. While lease lengths in many other asset classes can range from 3 to 5 or even 10 years, multifamily contracts are most commonly only 1 year. This shorter term allows landlords to adjust rents to inflation and properly capture upside.

Multifamily is historically resilient, too. Even when the stock market collapsed in the 2007-08 financial crisis, multifamily revenue only dropped by 7 percent.2


Industrial assets saw an explosion in activity when the pandemic brought extreme supply chain issues to light. Since then – and compounded by geopolitical crises – the appetite for onshoring, or bringing the production of goods back close to home, has rocketed.

A deeper look into supply chain costs reinforces the opportunity in industrial development. Industrial rent accounts for less than 5% of total supply chain costs, while transportation accounts for over 50%.3 For manufacturing and delivery-oriented companies, this data suggests it is in their best interest to invest more into strategically positioned warehouses and plants. For CRE investors, that could result in tailwinds for assets and markets in desirable locations, such as ports or major transportation routes.

Broadly speaking, the trend to spend on local industrial assets, along with continued growth in e-commerce, has driven the national vacancy rate for industrial assets to 4.3 percent.4 This rate is projected to stay low in the coming years.


While current CRE macro conditions suggest that investors should approach the market with greater scrutiny, there are plenty of opportunities amidst more general trepidation. 

Cadre’s team believes strongly in the fundamentals of certain asset classes -- certainly in multifamily and industrial – but in some niche, more burgeoning asset classes as well. And our expanding suite of offerings, including the Direct Access Fund II, aim to provide investors with tangible ways to seize on market dislocations. Contact our investments team to hear more information on the opportunities available today.


Educational Communication
Not AdviceThe views expressed above are presented only for educational and informational purposes and are subject to change in the future. No specific securities or services are being promoted or offered herein.

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This communication is not to be construed as investment, tax, or legal advice in relation to the relevant subject matter; investors must seek their own legal or other professional advice.

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Risk of Loss
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Investments offered by Cadre are illiquid and there is never any guarantee that you will be able to exit your investments on the Secondary Market or at what price an exit (if any) will be achieved.

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Any discussion regarding “Opportunity Zones” ⁠— including the viability of recycling proceeds from a sale or buyout ⁠— is based on advice received regarding the interpretation of provisions of the Tax Cut and Jobs Act of 2017 (the “Jobs Act”) and relevant guidances, including, among other things, two sets of proposed regulations and the final regulations issued by the IRS and Treasury Department in December of 2019. A number of unanswered questions still exist and various uncertainties remain as to the interpretation of the Jobs Act and the rules related to Opportunity Zones investments. We cannot predict what impact, if any, additional guidance, including future legislation, administrative rulings, or court decisions will have and there is risk that any investment marketed as an Opportunity Zone investment will not qualify for, and investors will not realize the benefits they expect from, an Opportunity Zone investment. We also cannot guarantee any specific benefit or outcome of any investment made in reliance upon the above.

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