AUSTIN—Obviously, virtually all the commercial real estate boats seem to be rising as the economic sun is shining. That's a key point in a recent interview with Emmitt Smith, CCIM, chairman and co-founder of Dallas-based E Smith Realty Partners and a keynoter at the upcoming CCIM THRIVE Conference here. 

In the interview, Smith outlines the many reasons and driving factors the market is as hot as it is. But, learning from the run-up to the most recent economic unpleasantness, we need to keep our eyes open—especially in this point in the cycle—to the many reasons we shouldn't throw caution to the wind. Read on as he explains:

GlobeSt.com: Have real estate firms re-defined their hold/sell strategies in the transition from the down-cycle to the current economic wave?

Emmitt Smith, CCIM: Yes, in many ways, the commercial real estate industry is on more solid footing than it has been for quite some time. Investors are redefining their hold/sell strategies as profitability continues to improve across most property types and markets. The asset class of each property determines the strategies set in place by investors. We're seeing some developers that used to be merchant developers hold off on investments to gauge what the possible ROI outcome will be in terms of demand.

GlobeSt.com: Where are the sources of capital? Have local and regional banks regained their clout?

Smith: The CRE sector continues to post strong returns, resulting in significant investor interest. The local and regional banks are becoming more likely sources of capital because they have a more in-depth understanding of the characteristics of their local markets than many pension funds or international investors. That said, international investors are starting to look outside the typical coastal markets to some Tier-Two and Tier-Three cities from a performance perspective. The improved lending scenario is likely to increase investments for both developed and under-construction properties across various markets.

GlobeSt.com: Are you seeing much impact from the growing number of crowdfunding sites?   

Smith: Generally no. They're active with respect to accredited investors asking to look into deals, but as far as larger transactions, crowdfunding sites haven't had a significant impact with our investments.

GlobeSt.com: Where are the hot opportunities now—both in terms of geographic markets and product types?

Smith: US cities are dominating global activity as investors diversify their investment strategies for single-tenant, multifamily, mixed-use and industrial assets. In our local market, and markets like it, multifamily and mixed-use property types are still very attractive.  

GlobeSt.com: We've seen products such as student housing and healthcare emerge from niche status to the mainstream. What's the next big thing and why?

Smith: Healthcare and medical office buildings are still on the forefront among the top products throughout the country. The investment community has a great deal of capital available for healthcare- and medical office-related space, and this market will continue to see an increase in competition. Also, we see a trend in the changing use of commercial properties as a result of technology and building efficiencies. E-commerce will continue to pose challenges for retailers and the way they use space.

GlobeSt.com: What worries you?  

Smith: What has become a cause of concern within the industry is the lack of quality retail product in older urban communities throughout the US as well as the potential overbuilding of multifamily communities here in Texas and in some East Coast markets. In addition, if the average real estate cycle is seven years, then we would be in about year five or six, based upon the metric of when the economy stopped losing jobs (2010 to 2011 nationally). We always need to be worried about the back end and what could happen. It pays to be conservative.