Miami rises to list of top 10 most attractive metro areas for investment
Increased Competition and Asset-Pricing Greatest Obstacle to Acquisitions
Majority of Investors Plan to Move Out the Risk Curve this Year
Miami, FL – April 22, 2015 – (RealEstateRama) — Half of all real estate investors in North America intend to increase their property acquisitions in 2015, with San Francisco the number one target for the second year in a row, according to the CBRE North America 2015 Investor Intentions Survey. For the first time ever, Miami ranked among the top ten U.S. cities that North American investors are targeting for investment.
The survey results reveal a clear picture of the current confidence and enthusiasm of commercial real estate investors in North America. Half of survey respondents said that they expect their purchasing activity to increase in 2015. Among this group, approximately one-third plans to raise their investment volumes by 20% or more.
The most compelling targets for investors in 2015 include most core markets—San Francisco, New York, Los Angeles, Seattle, Washington and Chicago. The high growth Texas metros of Dallas and Austin were also considered attractive for investment. Rounding out the top metros list are four metros currently enjoying robust economic growth: Charlotte, Atlanta, Miami and Nashville. Unsurprisingly, Houston dropped out of the top 10 list due to the challenges it faces with lower oil prices.
“The strength of the economy creating real estate demand, improved property fundamentals and measured supply gains make North America extremely attractive, with investors maintaining a hungry appetite for real estate assets. As was the case in 2014, a majority of investors intend to increase their property acquisitions in 2015. A natural consequence of this appetite for real estate assets is the competitive investment environment,” said Chris Ludeman, Global President, CBRE Capital Markets.
“Miami’s robust demand drivers include population and employment growth well above the national average, tremendous international trade, a booming housing market and a globally acclaimed tourism industry,” said Christian R. Lee, Vice Chairman, CBRE Capital Markets, Institutional Properties. “This is pushing rents up on every asset type. Add to that dynamic, the limited supply of land for future development, and you can see why Miami has become one of the most competitive, sought-after real estate markets in the United States.”
Investors identified increased competition and the challenge of finding appropriately priced assets as the greatest—and only—obstacle to investment in 2015. The challenge of finding attractive assets at favorable or even just acceptable pricing was clearly evident in the 2014 responses when 87% of respondents gave one of these three responses; however, the 100% response in 2015 highlights the challenge facing investors.
Concern about weakness in the global economy was ranked by investors as the greatest threat to property markets in North America. Even if the U.S. economy is managing to expand despite a sluggish global economic environment, 29% of respondents are very concerned this year, versus 10% in 2014. The second highest response—the perception that real estate has become overpriced—indicates that investors not only see challenges to themselves from the competitive investment landscape, but challenges to the industry. In 2015, 27% selected “overpriced real estate” as the greatest threat to property markets, versus 20% last year.
The majority of investors are willing to move out the risk curve (or feel that they must) in 2015, and are looking beyond core/good secondary for investment options to obtain yield. Over 50% of survey respondents selected value-add as the most attractive asset strategy. Another 13% selected opportunistic for a combined 66%, well ahead of last year’s 57%.
Investors remain interested primarily in industrial, office and multifamily product, with industrial leading the charge. Industrial is the preferred property type for investors in 2015, with one-third of survey respondents selecting either of the two industrial categories as their preferred sector. Industrial was also first in 2014 at about the same response rate. Office comes in second highest with 25% of the vote, down just slightly from 2014. Among niche property types, senior housing and healthcare are becoming increasingly appealing.
To request a copy of CBRE’s North America 2015 Investor Intentions Survey or to speak with a CBRE expert, please contact Aaron Richardson (212.984.7126 or aaron.richardson (at) cbre (dot) com) or Ayana Miller (212.984.6506 or ayana.miller (at) cbre (dot) com).
Survey methodology and composition of respondents
The 18-question “2015 North American Investor Intentions Survey” was conducted among CBRE clients between January 6th and February 6th, 2015. Responses were received from 80 investors representing a cross-section of real estate companies and investor types. The companies represented are primarily based in the U.S.
Respondents represented nearly all types of investors. The largest category is fund or asset manager at 33%. Private property companies accounted for 17% of the total, followed by REITs at 15%. Private equity or venture capital firms represented 12%.
The survey also captured a wide diversity of investment modes. Unsurprisingly, most investors used multiple types of vehicles for investment–-and selected multiple vehicles in the survey. Over two-thirds of respondents (69%) invest through joint ventures or other types of partnerships. Similarly, 68% make direct investments, and 50% invest through property funds. Investment in real estate through REITs was selected by 38% of respondents. About one-quarter of respondents invest through private debt and 11% through public debt (CMBS).
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2014 revenue). The Company has more than 52,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 370 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.
aaron.richardson (at) cbre (dot) com
melinda.sherwood (at) cbre (dot) com