Investment Guns Are Blazing
This is an HTML version of an article that ran in the July/August 2013 issue of Real Estate Forum. To see the original story, click here.
You could liken the recent economic unpleasantness to the iconic TV character Barney Fife, lone bullet buttoned away in his shirt pocket for safe-keeping. Buy that premise, and the recovery, slow as it might be, can be likened increasingly to Sam Peckinpah’s The Wild Bunch. In short, guns are blazing.
To judge from the results of our new Investor Sentiment Survey, neither a slowly improving macro economy nor threats of increasing interest rates or muddle-headed government intervention can hold anyone back.
Nearly 192 real estate professionals across the country responded to our recent survey, in addition to the 200-plus who took the survey live during a series of interactive sessions at RealShare Investment & Finance in San Diego (See sidebar). Across the board, the results carry the same message: Real estate pros are getting back to business.
Overwhelmingly, our respondents are net buyers once again, with a whopping 64.6% saying their current strategy favors acquisitions. This renewed aggressiveness may be simply a sign that investors can once again afford red meat, but only 12.5% said their balance sheets show more dispositions (with 22.9% pursuing both equally).
“You can’t leave money in your mattress or a bank,” says one investor. “There’s no return. Real estate and the stock market are the best bets.”
“It is a good time to buy and improve assets,” says another. “Rent increases are possible and projects can be financed with positive leverage.”
But as the returns indicate, not everyone is equally bullish. “We are looking at new deals,” writes one respondent, “but have not been successful buying in 2013 (after success with a number of acquisitions in 2011 and 2012). We see pricing as somewhat unjustifiable. Accordingly, we are in more of a disposition mode and have sold some properties into the stronger market.”
The dominance of buyers squares with those (39.1%) who say they’ve become more aggressive in the past year (compared with the 36.5% who are maintaining a steady course or the 8.9% who have trimmed their sails). And nearly a quarter—22.9%—are sounding out new markets. For 23.4%, this means secondary and tertiary metros.
Now, venture a guess as to what these net buyers are eyeing. If you said Multifamily, you are right, with some 81 pros checking that box. Retail is on the buy list for 69 of our respondents, and Office for 65. Industrial got the vote from 62 survey-takers, and 36 of our respondents are focused on Hotels. Healthcare garnered 31 votes and Student Housing, 23.
Property types clustered more tightly together on the sell side, though Multifamily still led the pack with 29 votes. Retail was #2 again at 16, followed by Office (15), Student Housing (14), Hotels (13), Industrial (12), and Healthcare (10).
“We believe that there is considerable opportunity in the office market,” writes one respondent, “as the economy continues to show improvement, especially in multi-tenant office product, due to an increase in small/start-up businesses as the economy recovers.”
Next: No Deals Without Capital