In this episode of The Big Mike Fund Podcast, host Mike Zlotnik welcomes back real estate investor Lane Kawaoka to discuss the current climate in commercial real estate. Together, they analyze the 30% to 40% valuation corrections across major sunbelt markets like Phoenix and Austin, the squeeze caused by elevated holding costs and interest rates, and the challenges of raising capital in a cautious market. Lane and Mike also explore alternative strategies, including small-bay industrial, AI data center infrastructure plays, and what it takes to find yield in today’s economic environment.
Key Highlights
Market Correction Expansion: Cap rate expansion in high-growth markets like Phoenix and Austin triggered asset valuation drops of 30% to 40% from peak levels.
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Holding Cost Squeeze: Elevated interest rates combined with rising property taxes and insurance have eroded traditional 8% multifamily cash flows.
The Underwriting Dilemma: Investors debate whether to underwrite assuming reversion cap rates will compress or hold strictly conservative exit cap assumptions.
Capital Formation Reality: Retail investor sentiment remains guarded after recent market adjustments, shifting the focus to deep-value opportunities.
AI Infrastructure Surge: Multi-billion dollar developments in AI data centers are creating a rising-tide effect for adjacent industrial real estate and small-bay flex spaces.
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Timestamps
00:00 – Intro & Catching Up with Lane Kawaoka
1:38 – The “Nuclear Blast” in Multifamily: 30–40% Price Corrections
3:46 – Elevated Interest Rates, Holding Costs, and Squeezed Cash Flow
5:57 – Capital Formation Challenges & Investor Sentiment
8:30 – The Reversion Cap Rate Dilemma in Deal Underwriting
11:25 – Evaluating Basis: Replacement Costs vs. Rent Growth Assumptions
16:30 – “Approximately Right vs. Completely Wrong”: Calling the Market Bottom
18:01 – AI Data Centers & The Infrastructure Boom Driving Industrial Real Estate
23:13 – Taking on More Risk for Historical Returns
26:45 – 2009 Post-GFC Lessons vs. Current Real Estate Dynamics
Connect with Lane:
Website: thewealthelevator.com
Email: [email protected]
Socials & Contact Links
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Twitter/X: ✖️ https://tempofunding.com/twitter
LinkedIn: 💼 https://tempofunding.com/linkedin
Instagram: 📸 https://www.instagram.com/tempofunding
Email: 📧 mailto:[email protected]
