CRE Leaders: Market Volatility is Catalyst for Action

In the second article of Connect CRE’s 2025 Leadership Series, we asked C-suite executives what alternatives they see to waiting it out amid the current market volatility. As it turns out, sitting on the sidelines isn’t really a viable strategy as far as they’re concerned. Keep reading for insights on taking a proactive approach from Tyler Chesser, Co-Founder & Managing Partner – CF Capital; Jim Dillavou, Principal, Paragon Commercial Group; Annemarie DiCola, CEO, Trepp; and Gregory MacDonald, CEO, Ballast Investments.

Considering current market volatility, what proactive hedging strategies could CRE investors employ beyond simply waiting?

Tyler Chesser: In this environment, passive strategies aren’t enough. We’re leaning into active asset management as a core hedge. With cap rate compression off the table and passive appreciation unreliable, driving NOI through disciplined expense control, dynamic revenue strategies, and tech-enabled efficiencies is critical. Operational optimization is our frontline defense against macro uncertainty. 

On the investment front, we’re not sitting on the sidelines. We’re underwriting selectively and targeting special situations—recapitalizations, loan assumptions, and fractured partnerships—where we can bring operational expertise and long-duration capital to solve real problems. Volatility creates dislocation, and dislocation creates opportunity—for those ready to act. 

Finally, our most durable hedge has been staying connected. Deep relationships with brokers, lenders, and principals continue to surface off-market opportunities. In a market like this, real-time information and access often outperform even the most sophisticated underwriting models. 

Jim Dillavou: This question implies market volatility is negative. We disagree. Paragon was founded in 2009 (during the GFC) on the simple premise that volatility resulting in repricing creates opportunity. Historically, capital flows into commercial real estate tend to seize during market volatility and, conversely, flow when ostensible “predictability” enters the market. While this macro investment strategy may be relevant for more liquid investments or securities, it is the wrong rubric for an inherently illiquid and long-term asset class like commercial real estate. To answer the question more directly, then, with increased volatility should come a decreased appetite for hedging and an increased appetite for long term investment into repriced CRE opportunities.  

More specifically, Paragon’s investment analysis is rarely focused on the near term. Instead, we analyze long term macro-economic indicators (market fundamentals, demographic trends, changing consumer behaviors, etc.). Alongside underwriting metrics that have historically been strongly correlated to long term investment durability in the necessity retail sector (stabilized return on cost, cash flow, etc.). Our goal here is to never have pressure to sell so that we could sell – if we so chose – on our terms and timing. This is why Paragon has owned numerous assets for over a decade. 

Annemarie DiCola: I’ve said it before, and it still holds true: now is not the time to cower or wait. Volatility itself presents opportunities. Staying informed is the first line of defense. Access to accurate, granular data on delinquency patterns, maturity schedules, property performance, and refinancing activity helps investors spot early signs of stress before they hit the headlines. By layering this insight into stress tests and scenario models, investors can gauge potential impacts on cash flow and valuations, positioning themselves to act decisively. Trepp clients consistently monitor these signals to forecast credit vulnerabilities and implement hedges more effectively, versus reacting after the fact. 

Gregory MacDonald: In a volatile environment, doing nothing can be the riskiest choice. More owners are focusing on operational execution as a hedge—tightening expense controls, improving leasing velocity, and actively asset-managing to stabilize income. Hedging today isn’t just financial—it’s strategic. Investors are reassessing business plans in real time, adjusting hold periods, re-underwriting risk, and—where appropriate—taking over direct control of assets that were previously outsourced. Control, speed, and data fluency have become core components of risk mitigation. This is a main reason why we’ve partnered with Palantir exclusively in the Bay Area to integrate the power of AI into our operations. 

That seems to go hand-in-hand with how the role of operations has evolved. As operating environments grow more complex, how can owners and managers drive performance without relying on macro tailwinds? 

Gregory MacDonald: You can’t count on appreciation to bail out execution gaps anymore. Performance must be built from the bottom up—tight leasing, real-time pricing, expense control, and visibility into unit-level operations. Our vertically integrated platform lets us have full visibility and control over granular details which is what drives alpha in today’s market environment. The generalist approach doesn’t hold up in highly regulated or operationally intensive markets. Driving performance today means knowing what levers to pull and having the infrastructure to respond quickly.