Real Confidence survey highlights faith in US real estate investments
The 2016 Real Confidence survey has found that commercial real estate investors are feeling extremely positive about the year ahead, with many planning to add to their portfolios in 2016.
The independent advisory service Altus Group Limited, the National Association of Real Estate Investment Trusts and the National Council of Real Estate Investment Fiduciaries compiled the study, which polled commercial real estate executives on their opinions about the commercial property investment sphere in 2016. Those questioned were from private equity firms, real estate funds and listed REITs, managing more than $700 billion in commercial property-related assets.
The executives were questioned on issues ranging from economic trends to consumer preferences and demographics and how the commercial real estate marketplace was affected by supply and demand. Their responses were measured on the Real Confidence scale which showed the ranking of 0 as being no confidence and the ranking of 100 as being absolute confidence.
The executives reported that their confidence in the US economy was 63.3, which was a far higher figure than that reported for the global economy, at 45.4. The respondents said that their rating of the US real estate industry was 68.5, adding a confidence score of 58.9 to the likelihood of an increase in real estate development.
The research also investigated the impact of a number of factors that may have an impact on investment decisions, such as the effect of the property holiday rental site Airbnb on the hotel sector and the ways in which the rise of technology has impacted global real estate. Another factor that was examined was how the habits of millennials were working to affect commercial real estate decisions across a wide range of different property sectors.
Robert K. Ruggles III, President of Altus Group’s RVA U.S. and Europe division, said that the survey was an incredibly useful tool when it came to offering existing investors and potential investors an overview of the investment arena, saying: “The Real Confidence survey uncovers trends and patterns in how CRE leaders view the industry and the economy, when making big decisions on investing. As experts in the global commercial real estate market, Altus Group is best positioned to interpret these insights given our analytics platform and integrated offering.”
The research also called for executives to allocate a theoretical $1 billion in a portfolio of real estate options that they believed would bring the best returns over the course of this year. They opted for a mix of private equity – which was given a 49.3 per cent allocation and REITs with 31.2 per cent of the allocated capital. Private debt was allocated 13.3 per cent of the theoretical capital while public debt was allocated just 6.2 per cent of the capital.
The National Council of Real Estate Investment Fiduciaries’ CEO, Peter Steil, highlighted the importance of the survey when it came to gaining an overall view of the real estate investment marketplace in 2016, saying: “Experience is key when investing in commercial real estate, so having the chance to partner for this project and get unique insights into the knowledge of seasoned executives has been a great opportunity.
The National Association of Real Estate Investment Trusts’ President and CEO, Steven A. Wechsler, agreed with Mr Steil, saying of the study: “We are very pleased to share the results of this innovative survey. Real Confidence offers perspective on the economic and marketplace factors that will shape our industry from the decision-makers who are leading it.”
This survey comes soon after a report from global real estate services firm Jones Lang LaSalle which suggested that cross-border real estate investments in major global cities are tipped to increase this year, with direct real estate investment becoming more and more attractive to investors.