Real Capital Markets Survey: Commercial Real Estate Investors Still in Buy Mode

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Industrial and Multifamily Property a Very Close 1-2 for Most Attractive Investments

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The focus is on finding assets that can deliver strong yields that outpace other investment options.

Commercial real estate investors are intent on buying real estate assets, with a preference for multifamily and industrial assets. The recently-passed tax legislation, in part, will strengthen corporate growth and validate value add investing strategies, according to a national survey conducted by Real Capital Markets (RCM).

The National Investor Sentiment Report and follow up interviews were completed in early January 2018 by RCM, the premier global, online technology platform for buying and selling commercial real estate. RCM surveyed investors from across the United States to gauge their investment strategies and outlook heading into 2018.

The vast majority of investors – 76.7 percent – characterized their investment strategy as buyers. More than 41 percent said they are in full buy mode, while 35.3 percent characterized their strategy as buy but trending toward hold. Almost half (48.4 percent) said their attitude has not changed in the last 12 months, and 16.5 percent said they are even more of a buyer now than they were one year ago.

“Investors across the country continue to see great opportunity and benefit in commercial real estate investing,” said Steve Shanahan, Executive Managing Director, Real Capital Markets. “Regardless of the product type or whether the strategy is core or value add, the focus is on finding assets that can deliver strong yields that outpace other investment options.”

The survey continued to showcase investors’ preference for multifamily assets. However, in part because of the weakened performance of some luxury gateway apartments and a strong industrial market, industrial properties have gained considerable momentum as a preferred investment option. Multifamily assets are still seen as the most attractive investment for 35 percent of investors, narrowly ahead of industrial assets for 33 percent of those surveyed. Office, retail, hospitality and land assets ranked next in order of attractiveness.

Among other top trends noted in the RCM National Investor Sentiment Report were:

  • E-commerce growth is driving industrial – The growth in e-commerce is just one element driving this sector. Other factors include: strength of the economy and availability of investment capital. This sentiment is reinforced in RCM’s Fall Industrial Investment Sentiment Report.
  • Investors Want Value Add – Two thirds of investors defined themselves as value add investors, looking for growth through renovation or repositioning properties to enhance value. Value add properties are in short supply, however, which means investors are finding it necessary to broaden their investment parameters. Opportunistic is the next closest strategy at 19 percent.
  • Investor Concerns Include Bid-Ask Differential, Lack of Quality Product – While investors are keenly focused on making acquisitions, they suggest that seller pricing expectations and the lack of quality product could significantly impact activity levels in 2018. Chief among those influencers is the bid-ask differential.
  • Better Climates Attract Investors – The Southern and Western regions of the country represent the most attractive and highly sought-after regions of the country, preferred by 37.7 and 31.8 percent of investors. In addition to the warmer temperatures, many states in these regions are attractive because of their pro-business climates.

As Q1 of 2018 moves into full swing, there is considerable optimism among RCM’s survey respondents. The expectations are that the strength and stability of almost anything industrial, as well as Class A downtown and suburban garden apartments, will drive the market in the coming year. Also, many investors will be focused on value add investment properties as a way to secure a desired yield. Regardless the type of investment, investors expect another strong year in the capital markets sector.

To download a copy of the Real Capital Markets’ 2018 National Investor Sentiment Study, click here.

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About Real Capital Markets:
Founded in 1999, Real Capital Markets (RCM) is the global marketplace for buying and selling CRE. RCM increases the speed, exposure, and security of CRE sales through its streamlined online platform. Solutions include integrated property marketing, transaction management, and business intelligence tools to unify broker-level and firm-level data and work flows. RCM has executed 57,000+ assignments with $1.9 trillion in CRE transactions. Over 50% of all U.S. commercial assets sold, over $10 million, are brought to market using RCM’s online marketplace annually.

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Michael Millar

Allison Millar
Real Capital Markets
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