SEATTLE – Oct. 6, 2011 – More than eight of ten U.S. real estate investors plan to expand their real estate portfolio in the next six months, according to the 2011 Colliers International Global Investor Sentiment Survey released yesterday. An expansionist mentality in the U.S. was echoed around the globe.
The survey measures the pulse of property investors worldwide – their appetite for risk, optimism, key concerns and sense of market cycles.
“Far more investors are looking at expanding their portfolios compared to last year,” says James W. Horne, executive sponsor of Colliers’ Global Investor Sentiment Survey. “However, talk of a double-dip recession continues to occur. Toward the end of 2010, most economic commentary was becoming more confident; however, this is not the case now.”
The majority of U.S. investors in the survey think that the market cycle is on an upswing, between the 6 o’clock and 8 o’clock position. (For the survey, 6 o’clock is considered a bottom, while 12 o’clock represents the peak of an economic cycle.)
The overwhelming U.S. investor concern was the supply of properties for sale; 62 percent cited it as their primary concern. Raising new equity and access to debt ranked second and third most cited determinant at 20 and 11 percent, respectively. Despite these concerns, however, 60 percent of U.S. investors are willing to take on more risk.
“Most U.S. investors say they’re (willing to accept more risk than they were willing to take) six months ago,” says Warren Dahlstrom, president of Colliers International’s U.S. Investment Services Group. “This most likely reflects the dearth of low-risk, fully leased prime real estate currently on the market,” with investors forced to looked at secondary markets and accept a risk of vacancy.
According to the survey, U.S. investors’ expect different returns on investment. About one-third want returns in the five to 10 percent range, one-third look for returns above 15 percent and just less than one third (32 percent) seek returns of 10 to 15 percent.
While U.S. investors did not specify a single city, state or region, many remain focused on primary markets in California, Texas, New York/New Jersey, Washington and Boston. The industrial and multifamily markets are most desirable, followed by office and retail. Most U.S. investors also expressed a desire to purchase domestic property, but a higher percentage is willing to invest overseas. Of those, Canada, Australia and Brazil were top choices.
On a global basis, the majority of investors surveyed believe tenant demand is rising, availability and vacancy is falling, and headline rents are on the rise. This suggests they have the confidence to make buying and selling decisions – a confidence absent in 2008 and 2009, when investment sales dwindled to a fraction of their usual volume.