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July 19, 2018
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A Majority of Real Estate Investors in the Americas Anticipate Increased Buying Activity in 2018

3/06/18

A prolonged period of U.S. economic growth, as well as tax cuts and favorable regulatory changes, has turned commercial real estate investors more positive going into 2018 than they were at the start of last year, according to the CBRE Americas Investor Intentions Survey 2018.

The 2018 survey results reveal the largest share (45%) of investors plan to increase their level of acquisitions in the Americas compared with last year. This pick-up in investor appetite marks a reversal from the downward or flat trend recorded in the prior two surveys. In total, 88% of investors plan to either maintain or increase spending in 2018—up from 83% in 2017. Just 12% of investors plan to reduce their purchases in 2018, lower than the 17% in 2017.

U.S. gateway cities continue to command considerable interest. Los Angeles/Southern California is the top-ranked metro for property purchases, followed by Dallas/Ft. Worth and New York.

“Despite the possibility of escalating interest rates, the vast majority of investors intend to acquire assets in the Americas in 2018,” said Brian McAuliffe, President, Institutional Properties, Capital Markets, CBRE. “Investors anticipate that the occupier trends with the greatest impact on real estate investments are last-mile logistics, flexible space, and less reliance on traditional office and retail.” He added “Investors are assesing the risk of high proportions of coworking space within a property on its long-term liquidity and residual value. Sustainability continues to factor into decision-making but is not a top priority for investors.”

Among the five different asset strategies—core, good secondary, value-add, opportunistic and distressed—value-add remains the preferred strategy (34%), but is down from 2017’s level (41%). Institutional investors—comprising sovereign wealth funds, insurance companies, and pension funds—are more interested in core assets than are other types of investors, with 33% indicating core as their preferred strategy vs. 20% of overall investors.

Industrial is increasingly the preferred property type, cited by 50% of investors as the most attractive for investment in 2018, up from 38% in 2017. Multifamily (20%) and office (14%) are the next attractive property types, though their shares decreased from last year. Despite competition from e-commerce, the retail sector improved modestly from last year, attracting 10% of investors compared to 8% in 2017.

Investor interest in “alternatives” strengthened significantly across most sectors. Real estate debt (37%) is the number one alternative currently held by most investors and will be targeted most actively this year. Student housing, senior housing, and healthcare are the next most common alternatives, each held by roughly 20% of investors.

Investors see a “global economic shock” that undermines occupier demand (30%) as the greatest potential threat in 2018, slightly more than last year (22%). In contrast, investors are less worried about interest rates rising more quickly than expected this year (16% in 2018 vs. 21% in 2017).




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