Investors upbeat but more cautious in 2016
NEW YORK – March 8, 2016 – Investors are bullish for real estate, but they still have some hesitations, a new study finds.
According to KPMG's 2016 Real Estate Industry Outlook Survey, most (91 percent) senior commercial real estate executives expect real estate fundamentals to be about the same or better this year. However, they also said they're growing more cautious about the ability to expand their portfolios and are taking steps to "de-risk" them.
Only 8 percent of investors surveyed by KPMG said they planned to enter new markets, down from 28 percent in 2015's survey.
"Investors are becoming more cautious in their decision-making as we near the end of the economic cycle, leading to changes in operations, portfolio management decisions, and the timing of their investments," says Greg Williams, national sector leader, building, construction and real estate. "They need to be prepared for the coming change in momentum."
Three out of four (74 percent) survey respondents expect foreign investment in U.S. real estate to increase over the next 12 months. They attribute an expected foreign investment surge to low interest rates, U.S. tax incentives and favorable risk-versus-return calculations for U.S. real estate markets.
"Strong economic fundamentals, a reliable legal system and other structural advantages in the U.S. have continued to fuel foreign interest in the U.S. real estate market," says Williams. "The continued inflow of foreign capital has led to a significant increase in competition for the best investments, leaving many investors with a major challenge in their hunt for yield across a variety of assets and markets."
Investors continue to be most bullish about multifamily properties. Also, the senior executives surveyed said they're growing more upbeat about healthcare investment prospects in development, likely due to a rise in healthcare demand from aging baby boomers.
While the senior execs are looking for opportunities to add to their portfolios, the risk factor continues to grow in importance, however.
"This 'de-risking' seeks to balance the sustained interest in U.S. real estate with a growing conviction that the market's growth trajectory may be turning soon," says Williams.
Source: KPMG 2016 Real Estate Industry Outlook Survey (February 2016)© Copyright 2016 INFORMATION, INC. Bethesda, MD (301) 215-4688