Earlier this year, Chicago-based Alliant Credit Union, one of the largest credit unions in the nation, launched SBL Edge, a lending platform designed for small-balance commercial real estate borrowers in the multifamily, manufactured housing and self-storage sectors. We asked Charles Krawitz, Head of Commercial Real Estate Lending at Alliant, his thoughts about emerging trends and what he thinks the future holds for the commercial real estate industry.

How do you define the term “longitudinal view” in the context of commercial real estate, and why is it crucial for understanding the industry?
Commercial real estate can be seductive, with prolonged upcycles tempting investors to take a snapshot of the market and reach overly optimistic conclusions about a property’s prospects. Similarly, market participants often have trouble seeing beyond a down market and erroneously conclude that rents and occupancies will be challenged for a long time to come. But true mastery lies in a deeper understanding: the longitudinal view.

This perspective goes beyond the current market, analyzing historical trends, economic cycles, and long-term property performance to develop a richer, more complete picture that transcends a moment in time. Like history itself, commercial real estate is cyclical. Furthermore, a longitudinal view helps set realistic return expectations. By understanding historical performance, sponsors can temper the urge to overpromise and, in so doing, build trust with their investors. In short, a longitudinal view is a compass for navigating the cyclical nature of commercial real estate. By understanding the long-term story, investors and sponsors can make informed decisions, build resilience, and achieve sustainable success.

Can you describe a significant trend or shift in the CRE market that you’ve observed over the past decade? How has this trend impacted the industry?
The past decade has witnessed a fascinating shift in the perception of self-storage facilities. It’s gone from being a niche segment to a recognized institutional-quality asset class. This transformation is a testament to several key trends that have been reshaping the CRE market, with a major driver being the rise of e-commerce. The surge in online shopping has fueled a demand for storage space, as both businesses and consumers require space for supplemental inventory or keeping infrequently used belongings.

The recognition of self-storage’s value has led to a significant influx of capital into the market. It’s often less expensive to convert an existing structure than to embark on new construction, and the ability to repurpose existing properties further strengthens the sector’s appeal. Secondly, many existing retail and office buildings are already climate-controlled, a key selling point for self-storage facilities. Finally, repurposing avoids the often-contentious NIMBYism battles that can stall new development projects. This trend of repurposing underutilized properties is likely to continue. With rising construction costs and a growing emphasis on sustainability, it presents an attractive option for investors and developers.

As Head of Commercial Lending at Alliant, what do you think are the greatest opportunities for the business’s growth?
Around seven years ago we started to lend to niche lenders that were engaged in both bridge and construction lending. This business has steadily grown for us, and we now finance around ten counterparties in this space. By and large, these are private lenders or debt funds that are staffed by highly experienced teams that have strong track records of successfully lending in a particular construct. These funds typically have long-standing relationships with property owners and developers, along with product expertise gained from specializing in an asset type as well as geography. Because of these factors, they typically lend more aggressively on targeted opportunities and turn around and pledge their loans to Alliant as a means of lowering their cost of funds.

This not only allows us to diversify our lending portfolio and gain exposure to bridge and construction loans, which we do not lend on directly, but it also affords us the opportunity to benefit from the expertise of our lending partners at a favorable risk/return profile. Our growth in this “lender finance” business has taken time, but it is now at a tipping point. We are fortunate that we have gained tremendous knowledge and established relationships as a foundation for exponential future growth.

Looking ahead, what do you believe will be the most significant factors shaping the future of CRE? How should industry professionals prepare for these changes?
Beyond the well-known shifts in office and retail, exciting trends are shaping specialized sectors. The e-commerce boom fuels demand for larger, well-located industrial spaces for efficient distribution, while automation further necessitates features like high ceilings and stronger floors in these facilities. Modern warehouses increasingly utilize sophisticated robots and automated storage and retrieval systems for tasks like picking and placing goods. These systems often require significant vertical space to operate efficiently. In turn, higher ceilings allow for taller and heavier racking systems. Self-storage is also thriving, and technology will play a key role here, too, with advancements in access control and contactless payments streamlining the self-storage experience.

Student housing is seeing similar technology-inspired transformations. From smart apartments with features like voice-activated assistants, eco-friendly controls, co-studying spaces, and an assortment of app-powered services aimed at streamlining rent payments, maintenance requests, smart access control, cameras, and personal safety apps are now table stakes. Student housing investors will need to leverage technology in new and changing ways in order to stand out in a competitive market. To be successful in an ever-changing and demanding world, investors will need to embrace proptech and stay abreast of innovation.

“By staying informed and proactive, commercial real estate professionals can ensure they’re shaping the future of the industry, not just reacting to it.”