Investors are anticipating the next downturn, but rather than taking their chips off the table, investors are looking to place capital this year before the next recession. According to an investor sentiment report from RCM LightBox, investors are looking to place capital in the first half of the year and before the November election.
“There are several factors driving the need to place capital ahead of a recession, whenever there’s a threat of a market downturn occurs,” Tina Lichens, COO RCM LightBox, tells GlobeSt.com. “Commercial real estate, has performed exceptionally well throughout the industry’s long run. In fact, most investors and investment advisors lament that there are few if any competitive alternatives that can produce the consistent yields that real estate has been producing. Investors see the U.S. as a safe-haven against the political uncertainty and currency fluctuations that can occur in other parts of the world and they want to continue building their portfolios here.”
There is a large amount of uninvested capital in the market, and that capital is a significant reason that there is a rush to invest before a market disruption or change in leadership. “Given the historically strong performance, investing in CRE is more attractive and popular as ever,” says Lichens. “This has made raising capital for investment easier than ever. That has led us to the point where we are today, with record levels of uninvested capital or dry powder. This in turn is increasing pressure to invest capital and, more importantly, to invest it wisely, especially ahead of any increasing headwinds that change the economic and CRE landscape.”
As a result, many are expecting a surge in activity in the first two quarters, and investment activity will likely be on par or even better than 2019 volumes. “The consensus among investors is that overall investment activity is likely to be as good as or better than 2019, despite concerns of increasing headwinds, a weakening economy and the impending election,” Lichens says. “With the sales activity levels we’ve witnessed the last several years, most in the industry will gladly accept a repeat performance.”
One thing that won’t change: the assets investors are targeting. Multifamily and industrial will continue to be the darlings of the market. “We’ll likely continue to see the greatest concentration of activity in the multifamily and industrial sectors, the two identified as the most attractive for investing in 2020,” says Lichens. “Both of those sectors should see stable to moderate growth, according to our survey respondents. Those sectors are being fueled by long-term shifts in consumer buying habits, industrial and living patterns, multifamily. “Those trends are not going away and they will continue to fuel significant activity in those sectors.”