Hogan: u201cInvestors are seeing the value of the sector's greater liquidity, lower fees and solid yields.u201d

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.”