CRE Executives Favor Industrial Sector
If given $1 billion today, most commercial real estate executives would invest it in the industrial sector, reported Altus Group Limited, Toronto.
The software and consulting firm surveyed commercial real estate decision-makers on CRE supply-demand characteristics and economic trends.
Executives ranked the industrial sector their preferred asset type, driven by “consistent” growth in e-commerce and the need for more industrial warehousing and distribution space, Altus said. The sector received the highest allocation with 33 percent invested in industrial within the private equity selections and 30 percent in equity real estate investment trusts.
“[This suggests] strong confidence that the industrial market is the asset class to watch,” said Altus Group Senior Executive Vice President Richard Kalvoda. “There is an increasing appetite for ‘right now’ shipping options, meaning e-commerce retailers will need to invest in more industrial spaces to meet the demand.”
Kalvoda noted one-third of CRE executives surveyed expect e-commerce sales will grow to nearly 15 percent of total retail sales by 2020.
The survey also highlighted the healthcare sector’s strength. CRE executives allocated 16.9 percent of their theoretical $1 billion to equity healthcare REITs and 14.6 percent to seniors living private equity investment, noting the need and demand for healthcare increases as the large Baby Boomer demographic ages.
Most CRE executives expressed confidence office space redesigns will incorporate more open concept layouts. But 59 percent said this layout does not lead to greater productivity and efficiency in the workplace.
With new lower income tax rates now in effect, CRE executives said they expect to see an “influx” in spending and investment that could benefit commercial real estate. But the survey noted the executives also believe natural disasters such as floods, earthquakes and hurricanes could slow the U.S. economy in the future. Nearly half the respondents said natural disasters represent a larger economic concern than geopolitical conflicts and terrorism.
