CRE Portfolio Performance Assessment: Is It Me or the Market?

We’re sure you’ve heard it time and time again, but the commercial real estate (CRE) market is shifting. The year marks the beginning of the next market cycle, which will redefine expectations for how we generate upside – from how we invest to how we operate to how we drive returns. 

Recent market shifts have put a lot of pressure on firms, and specifically  on asset managers, to take a more granular look at their portfolio’s performance. These more in-depth, frequent portfolio assessments are meant to identify inconsistencies within the portfolio so that changes can be made to get performance back on track, if necessary. 

As you’re examining your portfolio, you need to determine whether the challenges you face are a result of market factors, which may require that you adjust your strategies. Or, whether these challenges can be attributed to operational shortcomings, which can be addressed internally.


What’s Happening In the Commercial Real Estate Market?

From 2012-2022, the capital and commercial real estate markets experienced tremendous expansion. This expansion created opportunities for just about everyone in the CRE space to make money. However, the dynamic is changing and shifting expectations about the opportunities and returns created by real estate investments.

In  this new dynamic, cap rates are rising, valuations are cooling, and  debt marks are tightening. These factors are contributing to weaker returns. At the same time, tighter deal dynamics and deal structures for new acquisitions and dispositions may also jeopardize returns and ultimately the promote.

The compression and yield and lower asset valuations are expected to drive weaker returns. 


Differentiating Between Market Factors and Operational Challenges

Differentiating between CRE market factors and operational challenges requires a systematic and data-driven approach. By closely examining specific indicators, you can spot differences between external market influences and internal operational issues impacting your portfolio. Here are some steps you can take for a clearer differentiation between the two:


Perform Data Collection and Analysis

Gather comprehensive data on both the commercial real estate market and your portfolio’s operational performance. This data should include economic indicators, market trends, financial reports, tenant feedback, maintenance records, lease agreements, and other relevant metrics.


Conduct an External Market Analysis

a) Economic Indicators: Analyze macroeconomic factors like GDP growth, interest rates, and employment rates. Understand how these factors can impact the overall demand for commercial properties in your region.

b) Market Supply and Demand: Study vacancy rates, absorption rates, and new construction projects in your market. A surplus of available space may indicate a market factor, while low vacancies might suggest a well-managed portfolio.

c) Industry Trends: Stay updated on industry-specific trends that can influence the performance of your commercial properties. This includes changes in technology, consumer behavior, and regulatory developments.

d) Demographics and Migration: Assess population growth, demographic shifts, and migration patterns in your area. These factors can significantly impact the demand for different types of commercial properties.


Conduct an Internal Portfolio Analysis

a) Financial Performance: Evaluate the financial health of each property in your portfolio. Look for declining revenues, increasing expenses, or significant variations in performance compared to similar properties.

b) Property Maintenance: Inspect your properties regularly to ensure they are well-maintained and compliant with safety standards. Neglected maintenance could lead to operational challenges and affect tenant satisfaction.

c) Tenant Relations: Survey tenants for feedback and assess tenant retention rates. Poor tenant relations can be an indicator of operational challenges affecting your portfolio.

d) Lease Agreements: Review lease agreements to understand whether they align with current market conditions. Outdated or unfavorable lease terms may contribute to operational challenges.


Compare the Data and Metrics

Compare the data collected from both the external market analysis and the internal portfolio analysis. Look for correlations between market trends and the performance of individual properties.


Use Technology and Tools

Leverage data analytics tools, predictive modeling, and artificial intelligence to gain deeper insights into your portfolio’s performance and potential market influences. Lobby CRE transforms CRE asset management with automated operational and financial data intake, intelligent performance analysis and reporting, industry benchmarking, and configurable dashboards – all within a single platform.


Monitor Portfolio Performance Over Time

Market conditions and operational challenges can change over time. Continuously monitor and reassess your portfolio to stay proactive in responding to new developments.

By carefully evaluating the external market factors and internal operational challenges, you will be well-equipped to make strategic decisions that optimize your commercial real estate portfolio and mitigate any risk.


How Thirty Capital Can Help You Improve Your Operational Performance

At Thirty Capital, we provide detailed analyses and reports to help you benchmark; model asset, debt, and equity forecasts; and determine optimal next steps and timing for operational improvement, refinance, or other action. Our services include:


Peer-to-Peer Benchmarking

We will compare your quarterly operating statement with comparable properties in the market, giving insight and action into potential areas of improvement.


Asset Management Reporting

This monthly financial package review includes preparation of an Asset Management Report.


Market Analysis

We provide a comparison of operating statements for 5-10 comp properties in the market you provide by giving insights to operating costs, year built, number of units, area demographics, etc.



Understanding the difference between market factors and operational challenges can help you make well-informed decisions about your commercial real estate portfolio. By staying current on external market conditions and assessing your internal operations, you can better adapt to changes, capitalize on opportunities, and address challenges. 

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