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2023 Reflection



Greetings Friends —


As we approach the end of another remarkable year, I am taking a moment to reflect on the incredible journey and the milestones achieved. The past year has been filled with profound experiences, both personally and professionally, and I am grateful for each opportunity that has come my way.


Personal Milestones:

The year commenced with an extraordinary milestone in my personal life as I embarked on an incredible journey with my lovely wife. Our union has been a source of joy and strength, grounding me in an unparalleled way. 


Professional Endeavors:

I am grateful to my clients and friends for their continued support in business. This year has presented challenges as I worked on several real estate development and investment projects, spanning residential and commercial (data center) sectors. The escalating cost of capital and conservative underwriting have tempered the pace of transaction closings. Fundraising proves more challenging in the current climate, with investors holding additional allocations to the asset class until uncertainty regarding the denominator effect subsides.


As many of you may already know, I am a lifelong learner, and the pursuit of knowledge has been a constant companion throughout my life. On the scholarly front, my commitment to decarbonizing the tall buildings industry and developing a data-driven approach with Clarkson University has consumed a significant portion of my time and intellectual capacity. This endeavor has not only broadened my understanding but has also led to engaging encounters with industry leaders, entrepreneurs, and government officials. These interactions have sparked thought-provoking conversations surrounding sustainability and decarbonization initiatives within the tall building industry.


My collaborative efforts with Fordham University have resulted in the finalization of a new curriculum. I am pleased to share that I have been formally appointed to start teaching the course on Optimizing Design, Buildability, and Sustainability in Real Estate Development (REAL6022-03) in spring 2024. This opportunity allows me to impart my insights and experiences, contributing to the future generation's understanding of buildability issues in real estate development within construction projects.

 

Market Dynamics:

The continuously evolving U.S. real estate market has brought forth both opportunities and challenges, necessitating thorough market-based due diligence. This is particularly crucial in light of competitive capital flows and shifting dynamics across different sectors. Notably, the changing landscape and investor sentiment towards specific real estate segments have become increasingly pivotal, offering potential generational acquisition opportunities.


The residential sector remains the most active globally year-to-date, although fundamentals are now more subdued, settling around long-term averages. Investor sentiment for logistics and biotech remains positive, despite cooling fundamentals in the near term. Volumes have contracted globally by 40% year-to-date, prompting rapid repricing in the sector's markets. Office pricing and liquidity face continued pressure amid weak global sentiment from investors and lenders. Fundamentals across regions reflect an increasing polarization in performance between the highest-quality assets (Class-A) and the rest of the sector. The uncertainty of future demand persists, given the state of the economy and the adoption of hybrid work policies. Investors and lenders alike are focused on existing office exposure.


Global market conditions compel investors to remain discerning, carefully considering risks to global growth and earnings. The volatility and transitions observed within the real estate landscape have created a pivotal juncture to assess environmental, social, and governance (ESG) regulations. This is especially pertinent, as several firms are currently unprepared to meet the stipulated compliance standards.


Sustainability Advocacy:

In the midst of this complex milieu, the pursuit of establishing a comprehensive sustainability strategy for transitioning into a low-carbon future has emerged. This endeavor has prompted a conscious shift toward property sustainability. The increasing awareness of property sustainability within the U.S. real estate sector has led to premier Grade A office spaces commanding significantly higher rents.


The Path Ahead:

In 2024, I anticipate a backdrop of falling rates and improving earnings, diminishing the effectiveness of cash. While inflation is expected to stabilize, it remains wise to hedge against it. Understanding the key dynamics of a 5% rate world is crucial in this evolving landscape, especially with the momentum of AI propelling equities toward new highs.


Artificial intelligence infiltrated everything - AI will change many things. I won't even pretend to know all the things generative AI will do to our devices, our jobs, our lives, and our elections. But I promise you won't be able to escape it.


Looking ahead, the importance of whole-life carbon assessments in the design and planning stages of buildings has become increasingly pronounced. The integration of innovative building materials and the imperative need to reduce carbon emissions have emerged as focal points in our collective pursuit of sustainable, low-carbon built environments – A boom in cleaner energy.


The year 2023 has woven a tapestry of diverse experiences, each serving as a thread in the fabric of progress. I am immensely grateful for the unwavering support of an inspiring community and the invaluable friendships that have made this journey immensely fulfilling.


Ending the year on a heartwarming note, the delightful news of an upcoming addition to the Askari’s family has filled my heart with gratitude and joy, setting the stage for a new chapter in the year to come.


As we embrace the festive season, I extend my warmest wishes to each of you. May the holidays be filled with joy, and may the new year bring abundant opportunities for growth and fulfillment. Happy New Year!


Looking forward to the journey ahead,


Warmly,

Peyman



This letter of reflection expresses the views of the author as of the date indicated and such views are subject to change without notice. PAN Partners has no duty or obligation to update the information contained herein. This letter is being made available for informational purposes only and should not be used for any other purpose.

This letter, including the information contained herein, may not be copied, reproduced, republished, or posted in whole or in part, in any form without the prior written consent of author.


© 2023 PAN Partners,

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