Institutional Real Estate Investors Worry About Unstable Property Appraisals: PREA

Pension fund investors fear the impact post-coronavirus commercial real estate appraisals will have on CRE investments, according to a new Pension Real Estate Association survey.

Of 109 PREA members who answered questions about appraisals, 67% said valuations conducted today may contain material uncertainties after mass building closings from the virus disrupted traffic, putting monthly cash flow and occupancy levels temporarily in flux.

Another 24% of respondents said today's appraisals are likely to be somewhat less accurate, while only 5.5% of those surveyed deem current appraisals to be as accurate as they were prior to the national crisis. 

A majority of the professionals who took the survey represent either institutional investors or investment fund managers and advisers, PREA said. 

Investors linked to pension funds also seem to be more drawn to real estate debt investments now, with 39.1% saying debt investments in real estate have become more attractive than equity investments in the wake of the pandemic. 

Twenty-two percent had the opposite reaction, placing higher confidence in equity investments over debt, PREA said. The remaining respondents said they either don't have an opinion or they see no change in their preferences for debt and equity. 

While investment funds and institutional investors have their money tied to commercial office buildings, they admit their own employees are working from home and pushing for more remote work options going forward. About 60% of the respondents said all of their employees are working from home, while 31% said a significant majority of the staff is operating remotely. The remainder are either operating from the office or have a marginal amount of staff still working from home. 

The anonymous comments PREA respondents submitted with their surveys also show an industry keen on the idea of working away from the office even after the virus. 

"I don't know why anyone wouldn't want to work remotely at least some of the time," one PREA survey respondent wrote. 

Another said, "Over 80% of [our] corporate team would prefer a mix of some days working from home and some days in the office."