According to a new report conducted by TH Real Estate, a number of investment opportunities will present themselves this year in four key areas within commercial real estate.
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No. 1: Debt
This could be a prime time for commercial real estate investors to add debt to an equity or multi-asset portfolio, a move that can produce high risk-adjusted returns. Real estate transaction volumes have been strong in recent months and are expected to continue on pace throughout the next few years reaching an average of $360B between 2017 and 2020. Similarly, the market for mortgage originations, which is expected to have reached a total of $480B in 2017, is also anticipated to be strong in the coming years.
No. 2: Logistics
The logistics sector performed well in 2017 and that is expected to continue in the coming years thanks in large part to the strength of e-commerce and online deliveries.
Availability rates in the sector have reached all-time lows in recent days while rents have continued to rise. More supply is expected to enter the market this year, which could cause rents to level out, though construction costs could force rates even higher.
No. 3: Retail
Despite the retail sector facing turmoil over the past few years, there could still be plenty of opportunities in high-performing centers and experiential properties. Mid- to low-performing assets are expected to die out over the next few years, but those on the high end will rise to the top, using e-commerce to their advantage by improving customer experiences and operating efficiencies.
No. 4: Alternative Sectors
Self-storage, student and senior housing as well as medical office real estate have all risen in popularity over the past few years. With each showing resilience during past periods of economic instability, these sectors are being viewed as prime investment opportunities.
The healthcare sector shows the greatest potential for growth as the number of aging adults in the U.S. grows. An estimated 21.2 million Americans are over the age of 75 and by 2030, this number is expected to increase by an additional 14 million.
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