CBRE Survey: Investors’ Outlook for 2017

By Scott Baltic, Contributing Editor

Brian McAuliffe, Capital Markets, CBRE

Los Angeles—Most investors in CRE in the Americas expect to be net buyers, industrial has displaced multifamily as the preferred product type, value-add is still the most popular strategy and Los Angeles remains the most favored metro. These are some of the top-line results from the 2017 CBRE Americas Investor Intentions Survey, released late last week.

CBRE surveyed nearly 1,000 investors who indicated that they are focused on the Americas.

“While investors expect to largely maintain last year’s investment activity levels, they also intend to retreat on the risk curve, becoming more conservative in strategy and risk appetite. This is counterbalanced by the search for yield,” Brian McAuliffe, president, Institutional Properties, Capital Markets, CBRE, said in a prepared statement.

“Echoing concerns that arose at the beginning of 2015, investors perceive the global economy and rising interest rates as the greatest threats to property markets; they also continue to have concerns about asset pricing,” McAuliffe added. “If the anticipated level of inflow into commercial real estate materializes, this should to some extent counteract any pricing pressure resulting from a rise in interest rates.”

Strategies and Risk Preferences 

Half of the investors surveyed are looking primarily for yield, relative to government bonds and other asset classes. Risk tolerance appears to have generally shifted downward.

As in previous years, the largest share of investors is seeking value-add acquisition opportunities. The single asset category that showed a major increase in preference was good secondary assets, which are the primary focus of a quarter of respondents. Interest in core assets fell to third place.

Product Types

Industrial real estate is considered the most attractive by 38 percent of those surveyed. Multifamily fell to second place, and office to third. Only 8 percent of respondents cited retail as an attractive option.

Among secondary product types, only retirement housing showed an uptick in interest, to 17 percent.

Regional/Metro Preferences

Los Angeles kept its standing as the most desired metro area, with Dallas/Fort Worth second and New York third. Washington, D.C., surged to fourth place (from eighth last year), and Atlanta and San Francisco were tied for fifth, followed by Seattle and Houston.

Perceived Risks

Investors’ main concern going into this year is slow global economic growth decreasing occupier demand. Nearly as many investors (21 percent versus 22 percent), however, are worried about faster-than-expected interest rate increases.