ELLICOTT CITY, MD—Commercial real estate still has it over the broader equity markets. That’s the upshot of a recently completed survey of 500 high-net-worth investors conducted by the locally based Investment Program Association.
The survey was designed to gauge the outlook of investors toward investments in non-listed REITs and business development companies.
“After the significant downturn in the real estate market, investors are now saying that the market has turned a corner,” says Kevin M. Hogan, IPA president and CEO. “In today’s low-interest-rate environment, these ownership levels can help provide investors in non-listed REITs and BDCs with significant current income potential over a multi-year investment horizon.”
(Download the full report here.)
Fueling these bullish comments were results revealing that 45% of respondents expect to include non-treaded REITs in their portfolios, and a quarter of them will be targeting BDCs.
This is an impressive run-up from current allocations. Some 30% of the surveyed investors currently invest in non-listed REITs (of which 24% have between 1% and 5% of their portfolios currently invested in non-listed REITs). Thirteen percent of those surveyed say they are now investing in BDCs, with 11% holding between 1% and 5% in BDCs.
“Investors today are seeing the value of these products,” Hogan tells GlobeSt.com, adding that they’re going for the sector’s “greater liquidity, lower fees and solid yields.”
The market as a whole got favorable marks from the survey participants. Four-fifths of investors surveyed (80%) view the performance of the commercial real estate market better (36%) or the same (44%) than the equity market over the next five years.
That’s saying something, given the confidence the survey-takers are giving the equity markets. “A huge majority of investors (87%) expect the equity market to rise an average of 1% to 10% per annum over the next five years,” the report revealed.
In terms of return expectations, these investors want regular income. Nearly one-half of the group said it “was somewhat important that their own investment vehicles provide regular income. Another 29% said it is absolutely essential or very important.”