Commercial Real Estate Investors Show Increased Appetite for Risk in 2021, CBRE Survey Finds
25 Mar 2021
Preferences Emerging for Secondary Markets and Alternative Product Types
Commercial real estate investors in the Americas are showing a clear shift in risk tolerance and a preference for secondary markets in 2021, according to the findings of CBRE’s latest Americas Investor Intentions Survey.
The survey, which covers all asset types, found that investor sentiment and activity began to improve in the second half of 2020, and should continue to improve this year as widespread vaccination aids the economic recovery. In a clear sign that risk tolerance is growing, 30% of investors say they are targeting opportunistic and distressed assets in 2021—this is a record level and compares with 16% in 2020.
For the first time in the seven-year history of the CBRE survey, large investors (those with assets under management of more than $50 billion) are more interested in secondary markets than primary markets. Sun Belt markets are the most appealing: Austin is the top preferred market, followed by Dallas.
Investors are also expanding the types of properties on their shopping list, with 72% of respondents actively pursuing investment in one or more real estate alternatives in 2021, up from 54% in 2020. Life science labs, medical offices and single-family rentals are the most popular targets, followed closely by data centers and cold-storage facilities.
“Investors in the Americas appear more aggressive and will accept more risk to achieve higher returns. This is likely due to a stable economic environment, supported by government stimulus, and the belief that available capital will remain abundant for the foreseeable future, as well as intense competition among investors,“ said Chris Ludeman, Global President of Capital Markets for CBRE. “While the equity markets have signaled rising inflation expectations, at the time of the survey commercial real estate investors did not appear to be overly concerned in the near term.”
Other Key Findings from the 2021 Survey (conducted between December 2020 and February 2021):
- While Americas investor sentiment is improving, there is a disconnect between buyers and sellers: 70% of respondents plan to purchase at least 20% more than last year, while only 30% plan to sell at least 20% more.
- Pricing will be aggressive for logistics and multifamily assets, while discounts will be expected for other asset types.
- More than half of survey respondents have adopted environmental, social and governance criteria (ESG) as part of their investment strategy.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2021 revenue). The company has more than 105,000 employees (excluding Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.