During these uncertain times in commercial real estate some investors have shared with us that they are “waiting it out”. It’s our goal to deliver value to our investment partners through all market cycles, and while “waiting it out” isn’t exactly our position, we wondered what it looks like to be on the sidelines right now.  Below are a few of our thoughts:

Why Are Investors Sitting on the Sidelines?

On some level, waiting out the current market conditions is understandable. There are very real obstacles for investors to overcome just to find a viable opportunity-and then there are the challenges related to execution, and ultimately delivering value.  A few of the most common reasons for sitting on the sidelines include hybrid work (nobody goes to the office anymore), low property values, cautious lending by banks, high interest rates, lack of data to determine property values, and a lack of quality assets on the market. Combined, the case for sitting it out is strong.

The Realities of Sitting it Out

Real estate investing is a strategic process including detailed analysis, deadlines, and negotiations.  The psychology of completing the work is not for everyone, and in this market, opportunities are further complicated by market conditions and a host of other factors. Defining a strategy for success can be helpful to investors that are looking for some guardrails. Also, understanding the view from the sidelines can help shape next steps:

FOMO: Fear of Missing Out – Investors are caught between the fear of missing out on future opportunities if the market recovers quickly and the fear of buying too early and making a bad decision. This emotional rollercoaster can lead to hesitation and interrupt the investor process.

Patient Paralysis – While waiting for the “perfect opportunity” can be a good strategy, too much caution can make it tough to come to a decision. Many investors are sitting on the sidelines, unsure whether they’re being patient or possibly frozen by uncertainty.

Pressure to Deploy Capital vs. Need to Preserve Capital – It’s common for investors to feel pressure to put capital to work and create returns, especially if they have raised the funds. It’s a balancing act everyone does, especially when the market risks tell you to focus on preserving capital.

Explaining the Decision – Whether investing or holding back, you’re faced with making the case to partners and investors. While communicating strategy is always important, the market conditions add intensity to every action or inaction and explaining the details is necessary to maintain trust and credibility.

Hidden Advantages of Sitting Out (For Now)

Sitting on the sidelines may seem like a negative reaction, but sometimes it can be the best move for investors.  At times, market conditions and opportunity just do not align. In those moments taking stock and revisiting some of your processes and thinking can be invaluable.  Working to address portfolio concerns like a lagging vacancy can be time well spent.  It also makes sense to refine your tools, refresh past industry relationships, study deals that may be taking shape in the market, and generally maintain a ready and informed position.  When the time is right, you will be prepared to take full advantage of the opportunities.

How Long is Too Long?

The biggest problem with a wait and see approach to investing is that it’s hard to know when it’s been long enough. Keeping pace with market conditions and real estate trends is easiest when you’re fully engaged in those spaces. If you’re waiting it out, be mindful of these potential pitfalls.

If the Market Turns Faster than Expected – Investors waiting for the absolute bottom risk missing opportunity if the market rebounds sooner than anticipated. A quick shift in interest rates could provide the spark that revives interest and activity, leaving cautious investors a step behind. It’s possible the market will respond swiftly to slight changes.

Disruptors or Nontraditional Buyers Getting Ahead – Nontraditional investors—like tech companies, family offices, or foreign buyers may make moves in the market that given their motivations and backing are not always considered “mainstream”. Seasoned investors are tuned-in to these buyers picking up undervalued assets that disrupt more traditional strategies and create a sense of missed opportunity.

Momentum Matters – It makes sense that the investment team or investor base starts to lose some momentum.  When deals aren’t happening, frustration can creep in, people are less engaged, and you quickly see a loss of focus. What’s worse is the possibility that investors will start to assess other opportunities, maybe even outside real estate. Keeping people engaged can be the biggest challenge and may be a signal it’s time to make a move.

Opportunity Cost is Just Too Much – With current inflation, uninvested cash loses value. While sitting out the market might seem safe, reduced purchasing power becomes a real cost.  Avoiding risk can be costly and impact your ability to participate when opportunity becomes available. At some point the return that could be earned will outweigh the risk, and it may mean fewer investors in commercial real estate.

So When Do You Get Back in the Game?

Investor activity is likely to increase when key market indicators start to hit the news headlines—but it’s probably not going to happen all at once. Instead, we will likely see a slow increase in confidence like a shift in interest rates, price stabilization which will mean cap rates are more attractive, and potentially the creation of government programs, tax incentives, or zoning reforms that could improve investment models. Monitoring these key indicators can help investors be strategic about their reentry.

Final Thoughts

Sitting on the sidelines in today’s commercial real estate market doesn’t mean being idle—it can be a strategic choice that signals discipline and foresight. It might be tempting to rush into uncertain deals, but taking a pause allows for greater clarity, deeper analysis, and the opportunity to act with conviction when the time is right. The view from the sidelines should reflect a period of observation that’s used to refine your approach, strengthen relationships, and solidify a position that delivers stronger investments. Stay informed, maintain strong connections, and be prepared to act when opportunity finally meets value—because the sidelines won’t be a quiet place forever.