Why Investors Like CRE

CRE investor confidence and enthusiasm are shining through.
Jeanette Rice, CBRE

Jeanette Rice, CBRE

The CBRE North America Investor Intentions Survey 2015 forecasts that 50 percent of all real estate investors in North America intend to increase their property acquisitions in 2015, revealing a clear picture of the current confidence and enthusiasm of commercial real estate investors.

“The overriding message of the survey is that it confirms that investors are still very enthusiastic about commercial real estate and want to be active buyers,” Jeanette Rice, CBRE’s Americas head of investment research, told Commercial Property Executive. “Of course, if the investors are successful (and certainly early 2015 sales activity suggests that they are), then there will be added competition to acquisitions and pricing.”

A second important finding of the survey is that real estate investors/owners also expect to increase dispositions this year. While the survey did not ask why this is so, it seems clear that the increasing appetite for investment gives owners an opportunity to rebalance their portfolios and make good returns with the dispositions.

A third important finding is that the only major challenge of the marketplace is finding appropriately priced assets, revealing investors are willing to move up the risk curve to try to find the new investment opportunities.

“There remains an upbeat view of the national economy and property markets, which translates into property performance and a positive climate for acquisitions,” Rice said. “While there is a bit of uncertainly about the impact of global economic issues, by and large, investors are very positive.”

The report shows that investors remain interested primarily in industrial, office and multi-family product, with industrial leading the charge, with one-third of survey respondents selecting either of the two industrial categories as their preferred sector. Over 50 percent of survey respondents selected value-add as the most attractive asset strategy.

The most compelling targets for investors in 2015 include most core markets with San Francisco leading the way as the number one target for the second year in a row.

“There’s no question that San Francisco real estate is performing very well. The main driver, of course, is technology. The growth of tech firms in and around the Bay Area is unprecedented, which has created increased demand for space of all types—particularly office and multi-family,” Rice added. “San Francisco is a ‘high barriers to entry’ market meaning that increased space demand has led to significant increases in rents and property values. San Francisco is also a market which cross-border capital sources favor.”

Other strong showers included New York, Los Angeles, Seattle, Washington and Chicago. The high growth Texas metros of Dallas and Austin were also considered attractive for investment. However, Houston dropped out of the top 10 in 2015 due to the challenges it faces with lower oil prices

“There’s lots of competition, but it’s still a very positive investment environment,” Rice concluded.