Marcus & Millichap, a leading commercial real estate investment services firm with offices throughout the United States and Canada, reports that commercial investor sentiment remains near an all-time high. The firm’s commercial Investor Sentiment Survey Index is calculated quarterly and rose three points to 179 in the third quarter, up slightly from first quarter 2014.
Marcus & Millichap reports 70 percent of commercial real estate investors who were surveyed plan to increase their commercial holdings over the next 12 months. An additional 24 percent expect investments to remain the same, and four percent expect their real estate portfolio to decrease over the next year.
“The Index is at such high levels currently that even if it hovers at this same range, it is a reflection of further occupancy increases, rent growth and value gains,” says Hessam Nadji, chief strategy officer with Marcus & Millichap. “The fact that commercial real estate investor sentiment remains high is due in large part to the very attractive yields the commercial sector is delivering compared to alternative assets,” Nadji continues. For a decade the Investor Sentiment Survey Index has been a reliable leading indicator of the broader economy. “Based on its track record, this reading should result in further strength in the commercial real estate sector into the coming year,” concludes Nadji.
“Investors are looking at commercial real estate and recognizing an opportunity to borrow at a very low cost during a time when there is plenty of room for improvement in the financial performance of the asset,” added William E. Hughes, senior vice president of Marcus & Millichap Capital Corp.
With a tremendous recovery already in its wake, the apartment sector leads the way in confidence among sectors, reporting expectation of a 5.8 percent rise in value over the next year. In the hotel sector, nearly two-thirds or 62 percent of respondents reveal expectations for hotel values to increase over the next 12 months by an average of 5.3 percent. The industrial sector shows 69 percent of industrial investors anticipate that the value of their properties will increase, with an average 4.6 percent improvement expected.