💰 Liquidity vs. Location: Why CRE Fundamentals Still Win 🏢

💰 Liquidity vs. Location: Why CRE Fundamentals Still Win 🏢

📈 Easy Money or Smart Investing? Why Location Still Rules in Commercial Real Estate 🌎

Liquidity vs. Location: Why Fundamentals Still Rule in CRE

In commercial real estate, timing matters — but fundamentals win. While liquidity can temporarily inflate property values, long-term success in CRE still depends on what investors have always known: location, tenant demand, and cash flow are king.

The Liquidity Mirage

When the Federal Reserve or major financial institutions inject liquidity into the market, investors often see an uptick in capital chasing deals. The result? Cap rate compression, higher valuations, and a sense that money is cheap again. But here’s the reality: liquidity doesn’t fix weak fundamentals. It just hides them — for a while.

Think of liquidity like fuel. It can accelerate the market, but if the engine (your property’s fundamentals) isn’t sound, you’re not going far.

The Illusion of Cheap Capital

Even in a world where credit flows more easily, borrowing costs remain elevated compared to the ultra-low-rate era of the 2010s. Many investors misread liquidity injections as a signal of cheap money returning. In truth, what’s returning is market stability, not the free-money environment that fueled speculative buying.

That’s why the smartest investors still look beyond short-term trends and focus on properties that perform through cycles — with strong tenants, durable income streams, and growth markets.

Case Study: Hype vs. Fundamentals

One investor jumped on a multifamily acquisition in a tertiary market because everyone was “buying the dip.” The deal penciled only because of aggressive rent projections. Six months later, occupancy dropped 20% and debt service coverage slipped below 1.0.

Another investor, however, stayed disciplined. They bought in Katy, TX — a submarket with job growth, population inflows, and retail absorption. They paid a fair price but secured strong tenants and stable cash flow. Two years later, they refinanced at better terms and grew equity through consistent performance.

Lesson: Liquidity can inflate prices, but only fundamentals build wealth.

Why Location Still Reigns Supreme

Markets like Katy, Fulshear, and Brookshire show how location drives sustainability. Population growth, infrastructure investment, and diversified employment bases make these areas prime for long-term success. You can’t out-finance a bad location — no matter how much cash the Fed pumps into the system.

The Role of Smart Advisors

At Viking Enterprise Team – eXp Commercial, we combine market insight with capital strategy to guide clients through every cycle. Through Medallion Funds, we pair investors with tailored financing structures that balance liquidity and fundamentals — ensuring deals are built on solid ground.

Whether the Fed is tightening or easing, our philosophy remains the same: invest where fundamentals thrive.

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© 2023-2024 Bill Rapp, Broker Associate, eXp Commercial Viking Enterprise Team