Commercial real estate transactions have become increasingly driven by deal structure rather than simply the highest bid, as investors focus more heavily on risk-adjusted returns in a more challenging market environment. Industry executives say transactions now require significantly greater rigor in underwriting, execution and capital formation because margins for error are much thinner than in prior years. Investors are also concentrating capital into fewer, larger deals and narrowing their focus to preferred asset types with stronger entry economics. According to market participants, sponsors are evaluating fewer opportunities overall and becoming more selective and deliberate in how they deploy capital. At the same time, successful transactions increasingly rely on multiple value-creation strategies working together, including sourcing, underwriting, financing and asset management.
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