In a recent interview on Bloomberg Television, Lowell Baron, the new chief executive officer of Brookfield Asset Management’s real estate business, discussed the return of mega deals in commercial office space and the need for more (commercial office space). The conversation revolved around the significant increase in property sales this year after a three-year lull, the role of Brookfield in the industry, and the future of office real estate, among other topics.
Despite the industry’s sluggish performance in the past few years, Lowell noted a significant uptick in property sales in the current year, with Brookfield already selling about $13 billion worth of property to date. This figure is a stark contrast to the $3 billion in sales recorded around the same time last year, signifying the industry’s remarkable recovery. However, he was keen to point out that the market remains discerning, with best-in-class real estate operating companies and high-performing assets garnering the most success.
While discussing Brookfield’s performance, Lowell highlighted the company’s knack for identifying value in assets poised for future growth. This strategy was evident in Brookfield’s decision to invest heavily in office real estate during the pandemic. He also noted that the demand for high-quality office spaces continues to grow, and the supply of such spaces is limited, creating a crunch in the market.
Addressing the issue of lower-quality assets, Lowell expressed optimism that the worst is over. He cited rental housing as a sector where Brookfield sees potential, partly due to the chronic undersupply of housing across the world and the inaccessibility of homeownership for many people.
The conversation also touched on the likelihood of private capital assets being included in retirement funds. Lowell advocated for the inclusion of real estate in retirement portfolios, arguing that it offered lower risk and higher returns. He dismissed critics’ arguments that this move could lead to bad assets being dumped into retail, asserting that responsible owners of real estate would invest the capital into private real estate assets following the same strategies.
In terms of international investment in American assets, Lowell observed that while some international investors might be considering backing out due to political volatility, the general sentiment remains that the US has the deepest and most liquid capital markets, necessitating investment in the country.
Hawkins Commercial Realty Local Insight
Although the conversation did not specifically mention Miami, the implications of the discussion are relevant to the Miami office property market. The city has seen a boom in its office property market, driven by an influx of companies and remote workers seeking a business-friendly environment and favorable weather. The observations made by Lowell, particularly about the demand for high-quality office spaces and the value in rental housing, could potentially influence the strategies of real estate businesses and investors in Miami.