Which Assets Are Investors Seeking in 2022?
CBRE’s 2022 U.S. investor intentions survey highlights some striking — though in many cases unsurprising — trends about where investor dollars will flow this year.
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It’s no surprise that multifamily and industrial property investments have stolen the show in recent years. With escalating demand for housing and for distribution space, both sectors have hit new heights. And while the pandemic may have clipped the wings of multifamily rent growth for a brief time, rents have rapidly bounced back nationwide — as have investment transactions from savvy investors looking to capitalize on this growth.
But what’s in store for this year? CBRE recently released its U.S. investor intentions survey for 2022, which summarized findings from more than 100 surveys of investors large and small. At a high level, overall investment for 2022 is likely to be close to last year’s record high of $746 billion, the report says, though some factors could chill transaction volume, including interest rate increases, inflation, and the impacts of political instability around the globe.
Where’s the Money Headed?
In terms of asset classes, a whopping 60% of respondents indicated that industrial real estate was their top investment pick for the year, followed by 27% selecting multifamily. Interestingly, the focus on industrial assets was far from uniform: While more than two-thirds indicated they planned to target modern properties in major population centers, significant interest also appears for older buildings and facilities in secondary (or tertiary) markets, as well as for niche sectors like self storage.
Of the surveyed investors, more than 60% said they planned to acquire more commercial real estate — with fewer than 5% indicating they would reduce acquisition activities. While there was a less striking difference when it came to selling (about 33% said they would sell more, compared to 11% who would sell less), this marks an increase from last year’s survey.
In the report’s list of top 10 preferred markets, the Sun Belt dominated. Dallas, Austin, and Phoenix came in as the three most favorable locations, but eight of the 10 markets are located in the region, from Charlotte to the greater Los Angeles metro.
Properties in the Sun Belt, boasting the fastest population growth across the U.S., have been sought after for years, particularly in the multifamily sector. Although asset values and sales prices have climbed for years, many investors still identify a clear investment upside, especially given the strong demographic and labor trends in the wider region.
What types of commercial real estate assets are investors looking for in 2022?
In 2022, investors are looking for industrial real estate (60%) and multifamily (27%) assets. Additionally, there is interest in older buildings and facilities in secondary (or tertiary) markets, as well as niche sectors like self storage. Source
What are the most attractive commercial real estate markets for investors in 2022?
The top 5 industrial real estate markets for investors in 2022 are the Inland Empire, Los Angeles, Savannah, Dallas-Fort Worth, and Chicago, according to data from JLL and Yardi Matrix's national industrial report.
The Inland Empire has a sales volume of $2.9 billion and a vacancy rate of 0.40%, Los Angeles has a sales volume of $3.3 billion and a vacancy rate of 0.70%, Savannah has a sales volume of $0.9 billion and a vacancy rate of 0.90%, Dallas-Fort Worth has a sales volume of $2.2 billion and a vacancy rate of 0.50%, and Chicago has a sales volume of $2.7 billion and a vacancy rate of 0.60%.
If you're looking to acquire or refinance an asset in any of these markets, you can get a free quote by clicking the button in the menu at https://industrialproperty.loan/blog/selecting-the-best-industrial-investment.
What are the most important factors for investors to consider when investing in commercial real estate in 2022?
The most important factors for investors to consider when investing in commercial real estate in 2022 are the effects of the COVID-19 pandemic, the fiscal and monetary policies yet to be announced or adopted as a result of it, the inflation concerns, the rising investor demand, the abundance of less costly capital, the government's fiscal and monetary policy changes, the Infrastructure Investment and Jobs Act, the low interest rates that govern the industry, the increased costs associated with industry products and services, the GDP growth, the federal funds rate, the asset acquisitions, the popularity of U.S. real estate, the influx of foreign capital, the stable cap rates, and the wealth of capital waiting to be tapped into.
What are the biggest risks associated with investing in commercial real estate in 2022?
The biggest risks associated with investing in commercial real estate in 2022 are the effects of the ever-persistent COVID-19 pandemic and the fiscal and monetary policies yet to be announced or adopted as a result of it. Additionally, there may be increased costs associated with industry products and services to contend with, and the government may ease back on its quantitative easing policy by mid year, which could lead to an elevated federal funds rate. Lastly, there is still uncertainty regarding the impacts of the new COVID strain and what that means for foreign investors.
What are the best strategies for investors to maximize returns on commercial real estate investments in 2022?
The best strategies for investors to maximize returns on commercial real estate investments in 2022 include:
- Taking advantage of low interest rates and abundant capital to acquire assets at a lower cost.
- Exploring the potential of foreign capital injections, if travel restrictions are eased.
- Exploring the potential of government incentives, such as the recently enacted Infrastructure Investment and Jobs Act.
- Exploring the potential of hedges against long term inflation risks.
- Exploring the potential of risk-adjusted returns.
For more information, please refer to the 2022 Commercial Real Estate Forecast.