I’ve long been a fan of Howard Marks’ insightful memos, especially the one from July 2024 titled The Folly of Certainty. It’s a brilliantly succinct reminder that in both investing and life, certainty is often more of a mirage than a reality. Marks’ wisdom in navigating the unpredictable currents of the markets—whether it be political forecasts, economic projections, or stock market trends—equally applies to commercial real estate.
In fact, inspired by his approach, I decided to craft my own memo exploring the fallibility of certainty in our world: the commercial real estate (CRE) market.
One of the key takeaways from Marks’ memo is the idea that “we don’t know what’s going to happen, and we don’t know how markets will react to what actually does happen.” This is so true in CRE.
As many of us know, the assumptions we make about market trends—whether it’s the trajectory of rental rates, vacancy levels, or the impacts of interest rate hikes—are often wrong. But instead of acknowledging that uncertainty, we often act as though we can predict the future with near certainty.
The Myth of Predicting Market Trends
In commercial real estate, it’s easy to get caught up in the false allure of prediction. We analyze data, trends, and models, and they all suggest that a particular asset class or market is destined for growth. But as Marks notes, there is often “100% certainty” voiced by experts who, in hindsight, are proven wrong.
I’ve seen this happen time and time again. Think back to the early dark days of the pandemic. Could you have imagined the coming positive bounce in America’s economy? (Wall Street missed this, too.)
One of our operating partners acquired a manufactured housing community for $7.1 million. They received a quick offer of $9.5 million around March 1, 2020. I hoped and prayed he would take the money and run. He refused. After making a series of improvements, he received an offer of $15 million less than six months later. I’m so glad he waited! And I was thrilled to be wrong!
And take, for example, the forecasts for the office sector post-pandemic. At the onset of the COVID-19 pandemic, most experts were certain that office real estate was finished. Remote work was here to stay, they said. Vacancy rates would continue climbing, and landlords would struggle indefinitely. I felt the same way!
Fast-forward to 2025, and while the office sector has faced challenges, it hasn’t collapsed as predicted. Instead, demand for hybrid and flexible workspaces has exploded, and well-located office buildings with strong amenities are performing far better than expected. (Wall Street Journal article)
Multifamily, too, has defied expectations. Over the past few years, investors believed that rising interest rates would crush valuations and drive down demand. And yet, despite higher borrowing costs, many multifamily markets have remained resilient.
According to a recent Commercial Real Estate Finance Council (CREFC) survey (quoted in Trepp’s CRE Rundown 1/31/25), 65% of respondents believe property fundamentals—including occupancy and rents—will improve this year, even in the face of elevated interest rates. But in keeping with Marks’ premise, we can’t rely on their confidence.
Self-storage is another example. Many investors assumed demand would drop dramatically as pandemic-driven moves slowed and the results of overbuilding came home to roost. Yet even as migration rates stabilized, self-storage occupancy has remained quite strong.
Why? Because consumer behavior has evolved—people continue to downsize, move flexibly, and store their belongings long-term. The sector has taken a hit, but not as much as some expected. (Multi-Housing News article)
And then there’s mobile home parks. For years, institutional investors overlooked them, assuming the sector was too small, too fragmented, or too difficult to scale. Now, they’ve become one of the most sought-after asset classes, driven by affordability challenges in traditional housing and growing demand for quality workforce housing. (Walker & Dunlop and Callan articles)
Macro Factors and Unpredictable Reactions
One of Marks’ key points is that even the most informed professionals can be wrong—especially when they act as though the future can be known with certainty. This is something we’ve seen repeatedly in CRE, particularly with interest rate predictions.
In 2022, analysts widely believed that rapid Federal Reserve rate hikes would crush commercial real estate. And while some sectors struggled, others thrived. Industrial and logistics real estate, for example, continued to see strong demand, fueled by e-commerce growth—something many experts underestimated.
The Jan. 31 Trepp CRE Rundown also highlights a shift in sentiment. Despite high interest rates, 86% of CREFC survey respondents expect sales transaction activity to increase this year. Why? Partly because the market is adjusting to the “higher for longer” interest rate environment, and partly because capital markets are expected to improve.
Can we count on this sentiment to make market predictions? I wouldn’t! But on the other hand, if enough industry professionals believe a turnaround is coming, could it become a self-fulfilling prophecy? Time will tell.
The Role of Psychology and Uncertainty in CRE
Market psychology plays a massive role in commercial real estate. As Marks notes about the stock market, “Investor sentiment swings a great deal, swamping the short-run influence of fundamentals.” I’ve seen the same happen in CRE.
After the 2008 financial crisis, many believed commercial real estate was doomed for a decade or more. But by 2011, prime urban markets had already started recovering. Investors who recognized the emotional overcorrection were able to scoop up assets at massive discounts. My partner and I were practically printing money in our ground-up multifamily project in North Dakota from 2011 to 2013.
Today, we’re seeing similar sentiment swings. In 2023 and 2024, pessimism dominated the market. Many investors stayed on the sidelines, assuming that rising rates and economic uncertainty meant a full-scale CRE collapse. But fast-forward to 2025, and Trepp’s CRE Rundown 1/31/25 now indicates growing optimism across CRE sectors, particularly in the office market, where investor interest is returning. (Beware of pessimism and optimism!)
Intellectual Humility: The Investor’s Best Tool
As investors, we must recognize the limits of our knowledge and embrace uncertainty. Marks has often referred to intellectual humility as one of the most crucial qualities an investor can possess, and I couldn’t agree more. In fact, I’d argue that the best CRE investors are not those who predict every twist and turn, but those who approach investing with humility, adaptability, and a willingness to question their assumptions.
Ray Dalio put it best: “Look for people who have lots of great questions. Smart people are the ones who ask the most thoughtful questions, as opposed to thinking they have all the answers. Great questions are a much better indicator of future success than great answers.”
Great investors aren’t the ones who confidently declare, “Multifamily is dead” or “Interest rates will kill self-storage.” They’re the ones asking, “What am I missing? What are the factors that could surprise me?”
If we acknowledge that we can’t know everything, we open ourselves up to deeper due diligence and better decision-making. By avoiding certainty and remaining humble, we’re less likely to make rash moves that lead to losses.
Conclusion: Embrace Uncertainty, Avoid Catastrophe
The bottom line in commercial real estate—just as in investing in general—is that predictions are often flawed, and certainty is an illusion. There is no formula that guarantees success. As Marks aptly notes, “No one can predict reliably what the future holds in these fields, but many people overrate their ability and attempt to do so nevertheless.”
So, as we continue into 2025, let’s remember that true wisdom lies not in confidently stating what will happen, but in recognizing the inherent uncertainty of the market and making decisions with intellectual humility.
After all, while doubt may be uncomfortable, it is far less dangerous than misplaced certainty.
“Doubt is not a pleasant condition, but certainty is absurd.” — Voltaire
Stay humble, stay informed, and most importantly, stay aware that uncertainty is the only true certainty in commercial real estate.
Mr. Moore is the founder of Wellings Capital Management, LLC, the investment advisor of multiple real estate funds that are available to accredited investors. Investors should consider the investment objectives, risks, charges, and expenses before investing. For a Private Placement Memorandum (“PPM”) and other information for any fund, please call 800-844-2188, visit wellingscapital.com, or email invest@wellingscapital.com. Read the PPM carefully before investing. Past performance is no guarantee of future results. The information contained in this communication is for information purposes, does not constitute a recommendation, and should not be regarded as an offer to sell or a solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be in violation of any local laws.All investing involves the risk of loss, including a loss of principal. We do not provide tax, accounting, or legal advice, and all investors are advised to consult with their tax, accounting, or legal advisers before investing. Wellings Capital and PassivePockets are not affiliated.
Author Bio
After a stint at Ford, Paul co-founded a staffing firm where he was a two-time finalist for Michigan Entrepreneur of the Year. After selling to a public firm, Paul began investing in real estate. He founded multiple investment and development companies, appeared on HGTV, and completed over 100 commercial and residential investments and exits. He’s contributed to Fox Business, Real Estate Guys Radio, and BiggerPockets. A featured guest on over 300 podcasts, Paul also co-hosted a wealth-building podcast called How to Lose Money. Paul’s the author of three real estate books, including Storing Up Profits – Capitalize on America’s Obsession with Stuff by Investing in Self-Storage, and a book on multifamily investing. Paul is the Founder and Managing Partner of Wellings Capital, a real estate private equity firm that designates a portion of its profits to free victims of human trafficking. Paul has been married for 37 years and has four children.
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