What do CRE investors value in a deal? It depends on how long they have been in the game.
CrowdStreet's 2021 Investor Sentiment Survey Results found that 43% of investors with less than three years of experience indicated that targeted IRR was very important to them. In contrast, 33% of those who've been investing in CRE longer than three years showed a much stronger preference for sponsor experience.
"Overall investors are focused on reliability when evaluating an investment opportunity," according to CrowdStreet. "Well over half marked sponsor experience and the overall business plan as very important to their evaluation process, with double-digit percentage point drops to the next reasons on the list [targeted IRR and potential cash flow]."
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The reasons for investing in real estate also varied. The top reasons people added CRE to their portfolios were diversification (a weighted 3.27 on a 4-point scale) and preserving wealth or capital (3.23).
As far as property types, 48.5% of investors said they were very likely to invest in multifamily, while 31.1% said they were very likely to invest in industrial. After that, investors were very likely to invest in self-storage (21.7%), medical office (18.2%), build-to-rent (18.7), senior housing (13.1%), student housing (10.6%), hospitality (5.5%), office (5.2%) and retail (2.9%).
Among risk profiles, 33% of respondents said they were very likely to invest in value add. That was followed by opportunistic (25.3%), core-plus (23.3%), core (18.4%) and development (19.8%).
CrowdStreet pointed out that investors with less than a year of CRE experience were drawn to development, with 84% indicating at least some interest versus 73% of the rest of the respondents. It also found that newer investors were open to risk, with 21% saying their overall investment strategy in 2021 would be less conservative than 2020. That percentage was at 11% of the rest of the group.
Investors preferred the Southeast, with 39.8% saying they were very likely to invest in the region. That was followed by the Midwest (18.4%), Mountain Region (15.6%), Mid-Atlantic (12.8%), West Coast (12.5%), New England (7.6%) and the Tri-state area (6.9%).
Berkadia's 2021 Outlook Powerhouse Poll also pointed to strong interest in the Southeast.
"People are really looking for business-friendly states and areas," Ernie Katai, executive vice president and head of production at Berkadia, told GlobeSt.com in an earlier interview. "I think the Southeast, according to the poll, is one of those areas where we're going to see some real good continued activity. I do still think we'll see activity in the Southwest."
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Leslie Shaver
Les Shaver has been covering commercial and residential real estate for almost 20 years. His work has appeared in Multifamily Executive, Builder, units, Arlington Magazine in addition to GlobeSt.com and Real Estate Forum.
