As we head into the new year, investor sentiment toward commercial real estate remains positive, with many investors reporting that they plan to increase their allocations in 2016, reports the recently released Colliers International Global Investment Outlook. Overall, the U.S. remains the top destination for global capital, with global gateway cities the preferred investment target.
One trend the report noted was that while global appetite for real estate remains strong, rising uncertainty stemming from China, economic weaknesses in emerging markets, the tightening of monetary policy in the U.S., and geo-political events across the global has made investors more wary. Of the 600 investors surveyed for the report, 44% said they’re “likely” or “highly likely” to take on more risk over the next 12 months—a drop from 59% a year earlier, though this also may reflect that fund managers have taken as much risks as their mandates allow them. This trend was apparent across all types of capital, with the sharpest reduction in private equity funds, which dropped from 81% to 47% over the year.
When the report looked specifically at U.S. investors, it found that they have dialed back their intended investment activity from last year, with 21% of investors expecting to be net sellers this year, compared to none last year. Fewer investors also intend to expand their activity, while this group, as a whole seems to be moderately risk averse. Yield expectations among U.S. investors tend to be more bullish, with 68% of them expecting leveraged returns of between 11% and 20%, even though they recognize that finding the right yields has become increasingly challenging and further cap rate compression may be dwindling in some markets.
Given these trends, iFunding believes that crowdfunding will become a more popular investment vehicle for those looking to buy into commercial real estate opportunities in 2016.
Investors are reporting the opportunities provided through real estate crowdfunding have competitive risk-adjusted returns, high tangible asset value, attractive and stable income return, and are a good hedge against inflation. While there is always risk associated with investing in real estate, iFunding has the experience and capacity to perform due diligence on all our listings with the goal of minimizing risk and maximizing returns, whether in multifamily, office, industrial, retail, or hospitality.
The Most Popular Property Choices
According to Colliers, the most popular property choice for global investors in offices in central business districts at 61%, up from 46% last year. This followed by industrial and logistics (48%), developments (39%), and shopping centers (38%). Suburban office came in fifth and was one of the fastest growing sectors in terms of preference (32%, up from 21% in 2015), while multifamily felt the steepest drop, falling from second to sixth place this year despite continued interest from U.S. and Canadian investors. To read the full Colliers International Global Investment Outlook report click here.