More commercial execs to increase capital spending
NEW YORK – Sept. 4, 2014 – Amid slow-but-steady economic growth, more commercial real estate executives say they're looking to develop assets and deploy capital in secondary markets to generate returns, according to the 2014 Commercial Real Estate Outlook Survey conducted by KPMG LLP.
Of the 100 senior commercial real estate executives surveyed, 68 percent expect to increase capital spending in 2014, an increase from 2013's 60 percent.
Forty-four percent of executives said their company finds quality investment properties in the marketplace – but not at prices that deliver sufficient returns.
When asked which types of properties their company would consider, respondents said:
• Class A assets in primary markets (25%, down from 48% in 2013)
• Development opportunities (24%, largely unchanged from 25% in 2013)
• Distressed assets (17%, up from 7% in 2013)
• Class A assets in secondary/tertiary markets (16%, up from 12% in 2013)
• Class B/C assets (14%, up from 3% in 2013)
• Other (4%)
"As pricing in primary markets continues to climb due to the large influx of investment dollars in recent years, real estate executives are developing assets and deploying capital in secondary and tertiary markets to generate higher yields," says Greg Williams, national leader of KPMG's real estate practice. "This is a trend we will continue to see as real estate companies look to manage assets effectively and create alpha in this slow growth economic environment."
When asked to identify regions with the best real estate investment opportunities in the U.S., respondents said:
• Southeast (48%, up from 28% in 2013)
• Southwest (33%, down from 45% in 2013)
• Midwest (31%, up from 16% in 2013)
• Northeast (30%, down from 36% in 2013)
• Northwest (16%, down from 20%)
• Unsure (10%)
Outside the U.S., executives believe South America (23 percent), Asia Pacific (20 percent), and Central America (18 percent) offer the best real estate investment opportunities.
"Real estate investors are showing renewed interest in the Southeast given the manufacturing boom underway in the region and the expansion of the Panama Canal," said Chris Turner, Southeast leader of KPMG's real estate practice. "Those investors who understand how the canal will affect supply chain routes and know which communities are maximizing federal infrastructure grants … stand to gain a first-mover advantage in the market."
The majority of respondents (45 percent) said their company would increase spending the most on "geographic expansion" in 2014, and 28 percent of respondents (up from 16 percent in 2013) cited "entering into new markets" as the initiative most expected to consume senior management's time and energy in 2014.© 2014 Florida Realtors®