Putting the Active in Active Adult

By Brian Chandler, MAI, CRE, FRICS, Senior Managing Director for Partner Valuation Advisors, is cited in the February/March 2025 edition of Seniors Housing Business magazine.

As the senior housing industry's Active Adult subsector matures and gains popularity, communities cater to a younger demographic with amenities like fitness centers and travel programs.

"It's still in its infancy right now," Brian Chandler, Senior Managing Director for Partner Valuation Advisors, says of the subsector, "but it's starting to pick up from what we're seeing."

Chandler cites a number of amenities he's seen, including full-scale fitness centers, swimming pools, bistros, pickleball and bocce ball courts, and enhanced common areas among the attractions.

Read the full article to learn more about this popular subsector.

Optimism for the Hotel Investment Market

Despite Headwinds, Topline RevPAR Is Expected to Grow Through the Remainder of 2025 into 2026

By McKenna Luke, MAI, Managing Director, at Partner Valuation Advisors | Published here and GlobeSt.com, on March 13, 2025.

The hospitality sector is enjoying renewed interest from investors, with more deals in the pipeline, increased refinancings, and improved transaction volume. While the industry still faces challenges, optimism prevails for modest growth over the next year.

Anticipated Headwinds and Tailwinds to Hospitality Performance

The general consensus is that topline RevPAR will grow modestly through 2025 and into 2026, albeit likely below inflationary levels. On the positive side, demand for both business and leisure travel remains robust or continues to rebound depending on the segment. Leisure travel remains a cornerstone of the new demand mix, although somewhat bumpy in the last four years given the pent-up demand for leisure travel, deficit of international travelers to the US, and reduced spending within the economy and midscale chains due to inflationary pressures and economic uncertainty. A continued return-to-office movement and lower debt costs bode well for commercial travel to increase in both frequency and length of stay. Convention center bookings are strong for 2025/2026 and large-scale events such as the World Cup should drive demand.

However, expenses are expected to outpace RevPAR gains, as climate events continue to push insurance rates higher and changes to immigration and trade policy impact the cost of staffing and goods. Although revenues have met or exceeded 2019 levels, total profitability, especially when considering inflation adjustments, remains below the pre-pandemic figures for a number of assets.

While hotel operators and owners are embracing AI and other tech to increase efficiency, they remain focused on human connection with guests as a cornerstone of the industry. AI and innovation can reduce costs by improving scheduling and staffing efficiency; boost overall revenue through rate adjustments or F&B revenues; and free up hoteliers to interact more often with guests. A myriad of other solutions on the horizon will help increase profit and increase connection with guests. Operators who sit on the sidelines and ignore AI will not only decrease the guest experience but leave money on the table.

While the cost of debt remains elevated, tightening spreads and increased availability of debt have and will support transactions and refinancing. Many investors have begun to move off the sidelines and are no longer waiting to get deals done.

Historically, hospitality has not been the darling of real estate investment due to higher perceived risk and volatility. However, hospitality assets offer the ability to combat inflation with daily rate changes. This, along with hospitality’s current performance relative to other asset classes—especially office—has revigorated interest in the hospitality sector over the last two years. As an asset class, hospitality offers both yield and growth, especially given the industry’s desire to continue to innovate, drive revenue in creative ways, and embrace innovation for cost savings. Smart investors have realized there are portions of hospitality that are less risky, such as extended-stay, which has driven somewhat of a hybrid investor pool.

Hot Hospitality Segments 2025

As we look into 2025 and beyond, some specific sectors that are expected to perform well include extended-stay properties, outdoor experiential lodging, boutique and luxury hotels, and branded-residential.

Luxury demand remains strong and investor/lending interest in trophy assets or Single Asset Single Borrower (SASB) deals were a bright spot in 2024. Furthermore, the pricing ability within the luxury segment has combated rising costs, supporting an overall strong return.

The outdoor and experiential hospitality segment continues to grow since its relatively recent inception, with increasing institutional investment over the past 5-7 years. Prior to the pandemic, outdoor and experiential hospitality was limited to one-off “glamping” destination ranging from a tent without AC or heat to ultra-luxury, multi-bedroom units. The lack of definition and available data within the segment has resulted in a slow burn of investor interest and increased demand over recent years. Success in outdoor and experiential hospitality requires an understanding of past successes and failures within the segment, the ability to scale and retain a unique customer experience, and access to relevant data. Be sure to work with an experienced advisor in this unique space as data can be limited, seasonality and infrastructure requirements differ from typical hospitality, and barriers-to-entry can widely vary.

Extended-stay remains a targeted investment within the industry, especially given the higher profit margins and investor overlap with segments such as multifamily. Economy extended-stay has led the segment in terms of new developments and large portfolio transactions in recent years. Midscale extended-stay, a segment established within the last few years, is the newest path of growth and fits the niche between traditional extended-stay and economy extended-stay. While construction financing overall remains somewhat constrained, the lower construction costs and overall investment in both economy and midscale extended-stay should support continued pipeline growth. The only question is, will luxury, serviced, extended-stay be next? Or will this demand remain within the growing branded residence segment?

Hotel Construction Pipeline

Projections for new supply growth in 2025 should support stable or growing overall occupancy, while new supply may increase into 2026 or 2027. In the decade prior to COVID, 2010 to 2019, average supply growth was between 1 to 2%. Since the pandemic and even as recently as 2023 and 2024, supply growth was still down by half. New supply is expected to increase in 2025; however, projects under construction remains compressed outside of a few key markets such as Phoenix. Knowing the actual construction pipeline, which projects are financed, and which projects are almost shovel-ready will be an important distinction for investors in the near term. While construction costs and cost of debt can present hurdles, strong projects have been able to obtain financing in recent months.

Conclusions

With careful strategy, investors can capitalize on more transactions, new construction, and modest growth over the coming year. Seek out advisors with focused hospitality expertise who can support informed investment decisions with tools like feasibility and market studies. Consider engaging consultants with hotel experience to provide due diligence assessments and risk management services. Augmenting your strategy with a team of highly qualified experts will ensure you have the data you need to take advantage of the opportunities presented by this growing market.

The Good, the Bad, and the Unknowns: CRE Finance Trends and Tips for ‘25

Strategies for Navigating the Ups and Downs of Today’s Commercial Real Estate Landscape

By Joe Derhake, PE, CEO of Partner Engineering and Science Inc., and Eric Enloe, MAI, CRE, FRICS, Senior Managing Director of Partner Valuation Advisors | Published Feb. 26, 2025, on GlobeSt.com.

The recent MBA CREF conference was illuminating both on a macro forecast level, as well as in several important themes that emerged. MBA is projecting a positive year overall, but not as positive as previously forecasted - MBA revised its 2025 C/MF mortgage lending forecast down to 16% from its August 2024 projection of 24%. MBA’s chief economist and other panelists pointed to a mix of tailwinds and headwinds, including:

A strong appetite to lend across all debt types
Significant unpredictability – in the 10-year treasury, macroeconomic environment, and the US economic and policy environment
Continued elevated interest rates, and borrowers continuing to wait for drops
The “wall of maturities”, while an overplayed term, will be a reality in 2025 with nearly $1 trillion in CRE mortgages set to mature
Lenders will likely take a “no more free extensions” stance, adding to the maturities and forcing some action in the form of sales, refi’s, loan workouts, or foreclosures

In this Globe St. article, Joe Derhake and Eric Enloe break down key property trends for 2025 and beyond and offer guidance on how to make the most of this unique market.

Senior Housing Sector Getting Hit With Depressed Demand, Billions In Loan Maturities

Published in Bisnow National on Sept. 4, 2023

Betting on a forecast "silver tsunami" of baby boomers seeking varying levels of at-home healthcare after retiring, developers in the five years leading up to the pandemic poured billions into new assisted living centers and skilled-care facilities.

But now, with that population hesitating to take the step into senior housing, many of these bets are in question as the sector deals with a labor shortage, depressed demand, and $2B in encroaching loan maturities.

Read more in this article, featuring Partner's own, Brian Chandler.

Holistic Approach to Affordable Housing Due Diligence and Impact on Valuation

By JR Lephew, Director of Affordable Housing at Partner Engineering and Science, Inc,
and Owen “Chip” Ard, MAI, at Partner Valuation Advisors

The due diligence process is critical for ensuring the success and sustainability of affordable housing projects. The margins for affordable housing developers and owners are razor thin, and it is critical that they have a full understanding of the project's needs to ensure profitability and achieve the highest possible valuation.

Read more in this article from GlobeSt.com.

How Retail Owners Are Staying Profitable in Today's Market

By Joseph Miller, MAI, MRICS, Managing Director

Value changes in retail assets are not as dramatic as in other sectors, but landlords must fine-tune tenant mix and address big-box vacancies to stay viable.

While the retail market is undoubtedly difficult right now, the positive news is that retail is no longer the least desirable asset class. The commercial real estate slowdown has affected all asset classes, but the retail market, which faced its own difficulties prior to rising interest rates and return-to-work challenges, is somewhat less impacted. Unlike industrial and multifamily properties, retail did not see significant pricing spikes over the last few years. While cap rates are increasing on retail properties, the changes in value are not as dramatic as with other sectors.

Read more in this article from GlobeSt.com.

Strategies for Office Properties in a Down Market

By Eric Enloe, Senior Managing Director

As the office market struggles to recover, property owners and managers are challenged to preserve value through leasing efforts and must embrace resourceful, creative asset management and repositioning strategies.

Read more in this article from GlobeSt.com.

Four Ways to Safeguard the Value of Your Construction From a Market Drop

By Eric Enloe, Senior Managing Director

Unlike existing assets, construction projects lack financial history to demonstrate value—there’s no rent roll, leases, or income statements for an appraiser to review. How, then, do commercial valuation consultants place a value on a construction project?

In this article, Eric Enloe, of Partner Valuation Advisors, discusses how to evaluate and protect a construction project’s value.

Partner Valuation Advisors’ Michael Wahl Emphasizes Investors’ Need for Up-to-Date Data

By Michael Wahl, Managing Director

Partner Valuation Advisors' new Managing Director, Michael Wahl, was interviewed by ConnectCRE's Paul Bubny to discuss what insights Michael is seeing in the current market and what investors should be mindful of. In this discussion, Michael discusses property values, factors that could affect valuations, and what data is relevant to the current market. Read the full interview here.

2023 Multifamily Outlook: Cautiously Optimistic

By Scott Belksy, Managing Director

At the CREFC (Commercial Real Estate Finance Council) January Conference 2023, stakeholders in the multifamily market discussed, among other topics, their expectations for the coming year. Despite the forecasted recession, most seemed cautiously optimistic, and projections were far from dire. Our own observations of the multifamily market align with this perspective. Read the full outlook here.