Altus Group: CRE Executives Bet Big on Industrial for 2017

Commercial real estate executives are especially bullish on industrial and multifamily assets in 2017, reported Altus Group, Toronto.

The consulting firm asked 65 CRE executives how each would allocate a theoretical $1 billion for the best returns for 2017. Survey respondent Mike Miles, Senior Managing Director with Guggenheim Investments, said respondents favored the industrial sector. “The potential issues with retail, apartments and office are real and very apparent,” he said. “On the other hand, the potential issues with the industrial sector are less apparent at this time.”

But Miles noted that a trade policy change from the upcoming Trump Administration could affect the industrial sector, “causing a shift in both the type and location of the most desired industrial assets.”

The industrial sector took the top spot because CRE executives believe it will benefit from the macroeconomic changes expected from the Trump Administration, Altus reported. It received the highest allocation in both public and private equity selections with a 40 percent year-over-year increase from the private equity selections and a 61 percent increase from the real estate investment trust side compared to last year’s survey. 

The survey also indicated that multifamily remains a stable asset class. It ranked second among both private equity and REIT respondents.

“Continued rental demand, along with the challenging consumer lending environment, contributes to the expected stability of this asset class in 2017,” said Altus Group Executive Vice President Richard Kalvoda. 

Multifamily ranked highest among CRE executives surveyed one year ago, Kalvoda said. 

The Index also reported:
–Increased portfolio diversification compared to past years. Only 8 percent of respondents put their entire $1 billion theoretical investment into one quadrant.
–Private debt financing increased significantly, up 52 percent year-over-year. Investment interest in public debt also grew with a focus on commercial mortgage-backed securities-AAA securities, which were up more than 20 percent from a year ago.
–Anticipated tax cuts and increased spending from the Trump administration could strengthen the entire commercial real estate market in 2017.