BOSTON— A recent survey of commercial real estate investors ranked Boston as a top 10 target among Americas metros, according to CBRE’s 2019 Americas Investor Intentions Survey.
The survey, which covers all asset types, found that, in 2019, more investors are prioritizing secondary markets that can offer greater potential for both equity and income growth. Investor interest in secondary assets increased for the fifth consecutive year (33%) to gain significant ground on value-add (37%) as the most preferred strategy.
The survey also examined how investors view each of the different asset types:
- Industrial & Logistics is still the preferred property type, cited by 39 percent of investors as the most attractive for investment in 2019.
- Multifamily closely followed in second place, with 37 percent of investors naming it as the next most attractive property type—up from 20% in 2018.
- Office was cited by 10 percent of investors as the most attractive for purchase in 2019.
- Retail’s share of investors (9 percent) has held essentially steady over the past three years, despite competition from e-commerce.
“Industrial and multifamily remain the most sought-after asset classes in the Boston market. Industrial pricing frequently escalates beyond the reach of potential investors due to the lack of quality product offered for sale and the large buyer pool that chases the asset class. Class B assets have become more desirable as a value alternative to Class A product,” said Douglas Jacoby, Executive Vice President, Capital Markets, CBRE.
Overall, the survey shows that investors will remain active in commercial real estate markets this year, with 98% of respondents intending to make acquisitions. There has been a pronounced shift toward greater caution, with the share of investors planning to either maintain or increase spending in 2019 falling to 75% (from 88 percent in 2018).
“Continued strong real estate fundamentals, combined with historically deep debt and equity capital markets, provide good momentum for 2019. Investors are reducing risk and protecting income streams through diversification. Pricing is at or near the previous peak for most asset types in prime locations, so investors are seeking yield in secondary markets and alternative asset types,” said Chris Ludeman, Global President, Capital Markets, CBRE.
The Americas Investor Intentions Survey 2019 was conducted among CBRE clients during November and December 2018. The Americas survey is part of a larger global survey and covers the responses of nearly 300 investors who indicated the Americas is the global region that they are responsible for in their current position. The Americas respondents represent a diverse range of real estate companies and investor types. The largest investor groups in this year’s survey were developers/owners/operators and private equity, which is a change from prior years. Institutional investors—sovereign wealth funds, insurance companies and pension funds—account for 8% of respondents. Most respondents (68%) have less than $10 billion in assets under management (AUM). Eleven percent have more than $50 billion in AUM, and the remaining 21% fall somewhere in between. Institutional investors have significantly more capital to deploy—43% of institutional respondents have more than $50 billion in AUM. Nearly all Americas respondents are based in the U.S. This year’s survey included slightly fewer cross-regional investors than in previous surveys, particularly investors based in Canada.