AFIRE Finds Cautious Enthusiasm for U.S. Commercial Real Estate
The Association of Foreign Investment in Real Estate, Washington, D.C., said international real estate investors feel cautiously enthusiastic about U.S. commercial real estate.
AFIRE released an update to its International Investor Survey from March. “The optimism expressed by investors in the March survey continues to hold, though it is now through a lens of heightened caution,” the new report said. “For example, increased reliance on technology has heightened uncertainties in areas as diverse as office demand, geopolitics and risk-related spending. Until these emergent risks can be quantified and mitigated, this will likely remain high on investors’ worry list.”
But most of the uncertainty found in the earlier survey about office usage and deurbanization has declined as companies return to the office and cities gradually come back to life, AFIRE said.
Notably, surveyed investors said they have decreased their overall appetite for new office acquisitions to a point below that of retail. “For now, there remains continued enthusiasm for less traditional investments such as data centers, life science properties and even cold storage,” the report said.
Cybersecurity is a top investor concern, AFIRE reported. Nearly 80 percent of survey respondents said their cybersecurity worries have increased “substantially” compared to March–now ranking higher than taxes and inflation.
On the other side of the coin, worries about de-urbanization have “meaningfully declined,” the report said. In March, more than half of survey respondents called deurbanization a key concern, but this figure declined to less than 40 percent in August.
Nearly 70 percent of respondents said they believe climate change will pose a greater threat to investment than so-called “reverse urbanization,” or migration from U.S. cities.
More than 60 percent of the survey’s 76 respondents ranked U.S. economic recession as the most significant factor affecting U.S. commercial real estate investment over the next decade, followed closely by global recession at 53 percent.
More than 80 percent of respondents agreed the U.S. real estate workforce will need to become more diverse to manage future risks within and beyond the industry.