'Basic Human Necessities' is Where CRE Opportunities Exist
DLA Piper survey respondents optimistic about medical, grocery, seniors housing assets.
Respondents to DLA Piper Global Real Estate’s annual survey were clear-eyed on the challenges facing the market but when asked about any reasons for optimism, they pointed to demand for industries that serve basic human necessities.
That sentiment increased by 17 percent compared to 2022 to 37 percent this year.
“Investors are turning toward stable, safe assets amid uncertainty, and these results suggest that they are confident in the underlying strength of those asset classes,” according to the report.
To help meet demand, the report said there are vast amounts of capital available to be deployed into real estate investments, with record amounts of capital having been raised recently by real estate private equity funds.
“Institutional investors continue to allocate a portion of their investments to real estate,” DLA Piper said. “The fundamentals for many property types remain strong, and debt levels are generally lower than in past cycles.”
Falling in the basic services category, medical offices rose from 28 percent in 2022 to 37 percent, grocery-anchored retail rose from 22 percent to 27 percent, and seniors housing rose significantly from 13 percent to 25 percent.
Medical real estate development is seeing record-high rents and demand outpacing supply in the sector.
Grocery-anchored retail had a record transactions volume totaling nearly $15 billion.
About 90% of respondents said they’d increase or maintain investment in senior housing.
Multifamily housing remains attractive, ranking second only to logistics, warehousing, and cold storage – though it’s viewed as less of an opportunity than it was in 2022, according to the report. Investors, again, are looking for developers who create affordable or workforce housing as an opportunity.
Other opportunities identified by respondents have risen on the list since 2022, including hotels and lodging (14 percent in 2023, double from 2022) and student housing (22 percent in 2023, up 12 percentage points from 2022).