Global real estate investors plan to make $1.16 trillion in gross acquisitions in 2016, according to a newly released survey from CBRE. That’s up 3 percent from last year’s survey conducted by the giant Los Angeles-based real estate services provider.
The United States is still the primary target for investors, who collectively plan to spend 48 percent of their dollars in this country. The next most popular target for investors is Western Europe. More specifically, investors plan to spend 28 percent of their capital in Western Europe. Additionally, CBRE reports investor interest in Central and Eastern Europe grew compared with last year’s survey as a result of the faster pace of economic recovery in that region.
“The majority of investors (82 percent) indicate that their buying activity will increase or remain the same compared to 2015,” according to the CBRE Global Investor Intentions Survey analysis. “While these results are down slightly from the last two years — 86 percent in 2015 and 93 percent in 2014 — this is not indicative of widespread concern about the short- or medium-term performance of real estate as an asset class. More likely, it reflects some concerns about pricing, the direction of U.S. interest rates and current volatility in equities.”
The survey garnered more than 1,250 responses from a wide range of commercial real estate investors, with institutional investors (namely pension funds, insurance companies, fund or asset managers, sovereign wealth funds and banks) making up approximately 50 percent of respondents.
Responses were submitted throughout January and early February 2016, and the survey was conducted specifically in response to volatility in China’s stock market at that time.
Source: CBRE. Click to view larger.
The positive sentiment expressed by real estate investors occurred even in the face of worries about the health of the economy at either a local or global level.
“Not surprisingly, 2016 looks likely to be a ‘risk-off’ year, with investors reporting they are more focused on core assets and less likely to seek secondary, value-add and alternative opportunities,” says Chris Ludeman, global president of capital markets for CBRE.
Two out of every five respondents expressed an interest in foreign properties. As part of the desire for core assets, respondents also showed a clear preference for gateway and core cities such as Los Angeles, New York, London, Sydney and Tokyo.
Among the major commercial real estate property types, the office sector is the most popular with 30 percent of respondents indicating it would be their top target. Although there is a steep drop-off from there to retail (21 percent) and multifamily (20 percent), both of those property types saw a notable increase over the 2015 survey.
Preference for hotels also saw a slight increase — from 4 percent to 5 percent. Preference for industrial properties dropped significantly.
— Jeff Shaw