SAN ANTONIO—USAA Real Estate Co. is going where the growth is in 2015. The real estate investment arm of USAA is emphasizing attractive risk-adjusted returns across its acquisition strategy, while focusing its development capital on build-to-suits rather than speculative projects.

GlobeSt.com got an early look at RealCo's annual House View outlook report for this year, in advance of its release to the general public on Friday. The report provides an in-depth discussion of the company's expectations for the commercial real estate investment environment as well as its own investment strategy for the current year.

RealCo's global head of research, Will McIntosh, predicts that '15 will “yield attractive opportunities and equally potent pitfalls.” He adds that the company is “moderately optimistic about investment prospects in 2015, as an expanding economy and stout real estate market should make for an intriguing first half of the year.” 

Regarding the investment themes behind RealCo's strategy for the current year, McIntosh notes, “We are at a point in the cycle where alternative real estate strategies are attractive including value add, development, debt strategies and recapitalizations.” Accordingly, RealCo's report notes that company continues to focus on value creation opportunities “with an emphasis on markets experiencing job and population growth.”

Although most major markets are experiencing job growth, RealCo says it's targeting key sectors of the “new economy,” including energy, technology, and healthcare. “In our view, these sectors have been the most important drivers of economic growth, and going forward we anticipate a broadening labor market that will result in opportunities that will expand real estate activities to more primary and secondary markets,” according to the company's House View report.

“Although markets with a high exposure to hydrocarbon exploration/development will likely experience near-term volatility due to falling oil prices, our long-term outlook is still optimistic for places like Houston and Dallas (as well as parts of California, Colorado, and Pennsylvania)," according to RealCo. That's because "these areas are positioned to prosper as the concept of US energy independence takes hold.”

Added to which, RealCo notes that the US continues to be 'a leading developer of new hardware, software and other forms of technology, fueling growth in obvious markets such as San Francisco, the Silicon Valley, Seattle and Austin.” Tech is also a key demand driver in New York City, Boston, Los Angeles and Denver, among other markets.

“Technology, as a sector, has evolved from being primarily research and development to include an emerging segment that focuses solely on consumer-based products and services (e.g., social networking, media, gaming, education and internet content),” according to RealCo. “Close observation of the ongoing innovation within this industry is critical because each business model has unique real estate requirements and opportunities.”

Long an active player in development, RealCo is being more cautious this year, on account of the prospects of overdeveloping as construction pipelines have increased rapidly in several markets. However, the company will continue to provide development capital for multifamily, office and industrial BTS, spec industrial and office, grocery anchored shopping centers and hotels.

By 2018, according to the House View report, “nearly $1.4 trillion of commercial real estate debt will mature, and neither market values nor available sources of conventional senior debt will support the recapitalization of such a large amount. RealCo intends to fill this gap, as capital restructuring has become a critical component of our investment themes” for this year. Among other vehicles, the company intends to provide whole loans on institutional grade properties, “stretch” first mortgages and mezzanine debt, and capital stack restructuring.