Market volatility, rising interest rates and fears of upward cap rate movement have not curbed investors' appetite for commercial real estate this year.
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In fact, according to a recent CBRE survey, commercial property investors are bullish about the industry’s performance this year due in part to the passing of President Donald Trump’s new tax law and this prolonged period of economic expansion.
Forty-five percent of those surveyed plan to ramp up their commercial real estate acquisitions in the Americas this year, and roughly 88% of respondents plan to keep pace with or increase their CRE spending in 2018, up from 83% last year. Only 12% of those surveyed plan to reduce their real estate holdings this year, down from 17% in 2017.
Investors predict the following trends will have the greatest impact on real estate investment opportunities in the commercial space this year: last-mile logistics, flexible space and a pullback in investor dependence on traditional office and retail assets to boost the performance of one’s portfolio.
Of the five main asset strategies — core, good secondary, value-add, opportunistic and distressed — CBRE reports that investors are turning from core assets to value-add and good secondary assets in search of yields.
“Given the declining return environment, it is no surprise that investors are racing to find the next Seattle by increasing their focus on the higher-yield potential of high-growth secondary markets,” CBRE reports. “Investors are also moving further out on the risk spectrum to look for more opportunistic equity deals. Markets like Tampa Bay, Nashville, Montreal and Portland all rose substantially in investor interest this year."
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