SEATTLE — Colliers International released its 2011 Global Investor Sentiment Survey this week, which breaks down the international commercial real market and its overall gauge of the state of investment opportunities globally. Overall, Colliers’ survey shows that buyers are “most likely” to expand their portfolios in next 6 months, but lack of supply and financing, as well as economic and political uncertainty, make them reluctant.
“Far more investors are looking at expanding their portfolios compared to last year,” said James W. Horne, executive sponsor of Colliers' Global Investor Sentiment Survey. “However, talk of a double-dip recession continues to occur. Toward the end of 2010, most economic commentary was becoming more confident; however, this is not the case now.”
Global Outlook
On a global basis, the majority of investors surveyed believe tenant demand is rising, availability and vacancy are falling, and headline rents are on the rise. According to Colliers, in the first half of 2011, approximately 9,250 investment properties worth US$350 billion changed hands, an increase of 30 percent in volume over the same period in 2010. The U.S. was the most significant driver of this global figure, with a 124 percent increase in its investment transaction volume.
Internationally, 70.7 percent of investors responded they are “most likely” and 15.9 percent of investors said they are “somewhat likely” to expand their portfolios in the next 6 months. Conversely, in the 2010 survey, only 60 percent of investors said they planned to expand their portfolio in the coming year.
Despite a willingness to buy, however, a common complaint among investors was the lack of property for sale — nearly half of investors said this was an impediment to their expansion plans.
Regionally, key concerns in Asia, Latin America and Australia/New Zealand all are focused on global economic health, while in the United States investors are wary considering local economic health. In Europe, government policy is at the forefront of investors’ hesitancy toward the market.
On the other hand, North American investors seem inclined to take bigger risks, as 64 percent of Canadian investors and 60 percent of U.S. investors said they are more aggressive than 6 months ago, a stronger shift in risk tolerance than any other region. Overall, most investors are interested in buying within their own region, though the investors most interested in purchasing outside their own region were from Canada and Asia.
Stateside Sentiment – U.S. Investment
The majority of U.S. investors responding to the survey opined that the market cycle was on the upswing, between the 6 o'clock and 8 o'clock position. The bottom of the market is represented by the 6 o'clock position, the peak at 12 o'clock, upswing at 9 o'clock and downswing at 3 o'clock. Most investors said that over the next year, the market would be between 8 o'clock and 10 o'clock. More than eight of 10 U.S. real estate investors are planning to expand their real estate portfolio in the next 6 months.
Reflecting international trends, the overwhelming determinant of whether U.S. investors would be able to grow their portfolios was the supply of properties for sale, with 62 percent citing it as their primary concern. Raising new equity and access to debt were the second and third most cited determinant at 20 and 11 percent, respectively.
Additionally, over the past 6 months, roughly half of U.S. investors (47 percent) believe access to debt has improved and the cost of debt has gone down (51 percent). However, a clear majority (76 percent) believe pricing has come too far, too fast out of the recession. With that said, 53 percent believe that real estate is more valuable an asset than 10 years ago; in other words, the survey suggested that means investors are secure in owning quality commercial real estate in top-tier markets as a means to long-term wealth. While within that sentiment is implied the belief that values will hold steady and perhaps increase due to the lack of new construction, 76 percent of those surveyed said owning older property is a bigger concern than 10 years ago.
“Most U.S. investors say they are moving further out on the risk curve relative to 6 months ago,” said Warren Dahlstrom, president of Colliers International's U.S. Investment Services Group. “This most likely reflects the dearth of low-risk, fully leased prime real estate currently on the market, and investors being forced into secondary markets and accepting a degree of vacancy.”
According to the survey, U.S. investors' expectations for return on investment were split evenly across the board. About one-third of respondents sought returns in the five to 10 percent range, one-third was looking for returns above 15 percent and just less than a third (32 percent) were in the middle, seeking returns of 10 to 15 percent.
While U.S. investors did not specify a single city, state or region as the target of their investment dollars, many remained focused on primary markets in California, Texas, New York/New Jersey, Washington and Boston. Industrial and multifamily were the market segments respondents said were most desirable, followed by office and retail. Most U.S. investors also expressed a desire to purchase domestic property, but there was an increase in the percentage of respondents who said they were willing to invest overseas. Of those, Canada, Australia and Brazil were top choices.
The Number 1 concern for U.S. investors regarding impact on their target markets was the domestic economy (44 percent), followed by government policy and the global economy (16 percent apiece).
— Dan Marcec
About the survey:
Colliers International's proprietary Global Investor Sentiment Survey integrates the opinions of 360 major institutional and private investors representing seven world regions (Asia, Australia/New Zealand, Canada, Europe, Latin America, Middle East/Africa, and the United States). The Survey was conducted by Colliers International Research in collaboration with senior professionals from Colliers International's Global Investment Services division. The survey was conducted Aug. 1-15, 2011. A comprehensive 40-page report is available at www.colliers.com/globalinvestment.