If commercial real estate executives had $1 billion worth of capital to invest? They’d put most of their money in industrial assets.
That’s the result from the 2018 Altus Group Real Confidence Executive Survey. Altus Group Limited, a provider of advisory services, software and data solutions, releases the confidence survey each year. This year, commercial real estate executives said that they are particularly confident in the strength of the U.S. industrial market.
In addition to polling executives, Altus Group asks them how they would allocate a theoretical $1 billion worth of capital in CRE investments to get the best returns in 2018.
The industrial sector performed well here, ranking as the preferered asset type for investment in 2018. Executives cited the continued growth of e-commerce and the need for more industrial and warehousing space as two reasons for industrial’s strength.
Industrial also received the highest allocation of capital, with executives investing 33.2 percent of their theoretical capital in industrial in private equity transactions and 30.5 percent in equity REITs. In addition, 32 percent of CRE executives in the survey said that by 2020 e-commerce sales will represent more than 14 percent of total retail sales, providing another boost to the industrial market as companies will need to invest more in warehouse and distribution space.
The healthcare market fared well, too. Executives said they would allocate 16.9 percent of their CRE capital to equity healthcare REITs and 14.6 percent to seniors living private equity investment.
Executives do have concerns, though, some focusing on natural disasters other on more man-made ones.
Richard Kalvoda, senior executive vice president at Altus Group, said that some CRE executives worry that promises made by the federal government might not come to fruition.
“Commercial real estate executives are questioning the Trump administration’s ability to deliver on broader promises, such as funding infrastructure programs, and we’re seeing this impact in the survey results,” Kalvoda said. “While executives are confident in the health of the economy, the large increase in public debt allocation this year underscores their caution and the very real uncertainty in the market.”
The survey also found the CRE executives have real concerns about the impact that natural disasters such as floods, hurricanes and earthquakes could have on the economy. The survey found that 46 percent of respondents believe that natural disasters are a larger economic concern than geopolitical conflicts and terrorism.