CRE Midwest

RCM: Investors still sold on CRE, but they're a bit more cautious

RCM: Investors still sold on CRE, but they're a bit more cautious,ph01
Multifamily remains the favored asset class among investors.

Investors still like commercial real estate. But they’re a bit more cautious about sinking their dollars into it, according to the latest research from Real Capital Markets.

According to Real Capital Markets’ 2019 National Investor Sentiment Report, investors still say there are plenty of investment opportunities in commercial real estate. Finding the best investments, though, requires more effort today, survey respondents said.

“For the past decade we’ve experienced unprecedented levels of investment activity, with each year establishing another new record,” says Tina Lichens, chief operating office of Real Capital Markets, in a written statement. “With words like ‘plateau’ and ‘flattening’ now entering the lexicon, it’s important to note how far the market has come and that in these good times, plateaus are part of a healthy cycle.”

Almost two-thirds of investors partcipating in the survey said that the current real estate market is in neither boom nor bust mode, but is somewhere in the middle. Investors said that though the market is flattening out, it is not about to bust. Investors also said that the industrial and multifamily markets won’t boom or bust because of the strong demand that remains for these product types.

Despite their increased caution, investors still appear to be in buy mode, even with interest rates continuing to rise. In 2019, 65 percent of survey participants characterized their investment strategy as “buy” or “buy but trending toward hold.” That is down from 2018 when 77 percent of respondents said that they were focused either on buying or buying/holding.

Not surprisingly, investors said that the multifamily and industrial sectors present the greatest opportunities for investment today. Multifamily remains the most attractive asset class for investors, with 36 percent of survey respondents saying it is the commercial real estate class that inspires the most confidence.

Industrial real estate came in at a close second, with 28 percent of respondents choosing it as the most promising real estate investment.

“The industrial sector continues to provide the stability and long-term growth that investors desire, particularly given the strong expansion in e-commerce,” said Steve Shanahan, executive managing director of Real Capital Markets, in a statement. “While investors are adjusting their criteria to account for market conditions, this sector should continue to be among the top performing asset classes.”

Investors did express concern about interest rates, but most also said that rising rates won’t change their position as buyers in 2019.