CRE emerging trends and market challenges

Ahead of speaking at IMN's leading Laguna forum - Winter Real Estate Private Funds conference - Katherine Bissett, Partner at Cox Castle shares early insights on CRE need-to-knows.

What emerging trends in commercial real estate (such as proptech, industrial logistics, or alternative asset classes) present the greatest opportunities for private funds in the current market cycle?

• We are moving through the point in the market cycle where trouble assets are being resolved with foreclosures, deeds in lieu, discounted payoffs, etc. No one likes to see these transactions, but the silver lining is they result in a basis reset, which creates an investment opportunity for private funds that can identify new path forward for these properties in the market.
• We’re seeing a lot of investment in AI. This is creating opportunities in the commercial real estate market by driving up demand for office space in certain markets that were previously struggling, such as San Francisco. It has also resulted in a lot of investment in the development of data centers, so we are seeing opportunities for funds that are looking to invest in the development or financing of these complex projects.
• On the debt side, we have seen some private funds opting to focus their lending efforts on niche markets that are performing well in the current economic moment, such as cold storage facilities, medical office buildings and senior housing. By providing shorter or mid-term bridge loans, private funds can more quickly move in and out of investments, which allows them to redeploy capital to areas of the market that are on an upswing.
• Also on the debt side, we continue to see private funds utilizing leverage to support their lending efforts. The leverage is generally coming from large national banks and takes a number of different forms (such as note-on-note loans, master repurchase facilities, warehouse lines, etc.). These leverage arrangements allow private funds to increase their liquidity and deploy more capital into the market across asset types.

How are private fund managers adapting their investment strategies to navigate rising interest rates, inflation pressures, and evolving tenant demands in commercial real estate?

• Private funds, both on the debt and equity side, are continuing to focus on strong fundamentals when making investment decisions. This has been the trend since the regional banking crisis in 2023, and although capital is moving more freely now and interest rates have stabilized, fund managers are still focusing heavily on quality assets with strong sponsorship. There remains uncertainly around inflation and the continuing upward trend of operating costs put pressures on property performance, so underwriters are being conservative in their forward-looking assumptions and constantly recalibrating as the market and these variables fluctuate.
• As noted above, private funds are being very strategic in their investment choices and focusing on niche asset classes that have strong performance metrics notwithstanding the external market uncertainties, such as medical office buildings and senior housing.

Join Katherine Bissett onsite at premier gathering: Winter Real Estate Private Funds conference, January 21-23, 2026 at the Montage Laguna Beach, CA - register here.