Despite adversity, U.S. real estate investors will reenter the market in 2024, favoring cities known for consistent value appreciation.
CBRE’s 2024 U.S. Investor Intentions Survey reveals a significant shift — over 60% of investors plan to expand their property portfolios. This figure starkly contrasts last year’s mere 16% intending to purchase real estate.
For investors in 2024, the primary worry is enduring higher interest rates, cited by approximately 87%. Apprehensions regarding stricter credit availability, loan terms, and disparities in price expectations between buyers and sellers closely trail this concern.
Investors Remain Optimistic
Despite current challenges, most estate investors foresee a rebound in deal activity by the latter half of 2024. Key factors driving this optimism include fair price adjustments and increased distressed opportunities, both crucial for investor interest.
Notably, multifamily and industrial real estate remain the top choices for investment this year, as highlighted by the survey.
CBRE’s global president of capital markets, Chris Ludeman, notes that investors are adopting a forward-looking approach despite ongoing credit challenges.
Investment activity will pick up steam later in the year. Investors notably rely on opportunistic and core-plus strategies to attain elevated risk-adjusted yields.
According to CBRE, the survey encompassed 134 predominantly U.S. investors with real estate assets under management spanning from less than $5 billion to over $50 billion.
They surveyed mid-November and mid-December, as confirmed by the company. This year, you can expect heightened activity among various investor types, including developers, private equity funds, real estate funds, and investment trusts (REITs).
Top Markets
According to the survey, the Dallas-Fort Worth region ranked as the fourth-largest metropolitan area in the nation and continues to hold the top position as the most preferred market for investors for the third consecutive year.
Following closely are Miami, Atlanta, Nashville, Tennessee, and Charlotte, North Carolina. In an alternative ranking, investors have singled out high-growth secondary markets and prominent East Coast markets as the top contenders expected to excel this year.
Dallas-Fort Worth secured the No. 1 spot for total property returns, closely trailed by Miami and Boston, as revealed by CBRE’s survey.
Darin Mellott, vice president of CBRE’s capital market research, explained that the preference for favored markets aligns with ballooning population and dynamic economies.
He emphasized that commercial real estate mirrors these local economic dynamics, with survey respondents expressing confidence in the long-term growth prospects of these metropolitan regions.
New York Bagging the Sixth Spot
New York City secured the sixth position for anticipated total property returns this year and ranked seventh as the most attractive market.
Mellott noted the adage that deems New York City the nation’s enduring boom town, highlighting its unparalleled establishment and liquidity that captivate investors for its promising future.
He emphasized the Sun Belt’s prominence and the East Coast markets’ extensive history of investor favoritism.
Austin Not Holding Back
Just three years ago, Dallas-Fort Worth started its ascent among the favored U.S. markets for significant investors, while Austin, Texas, claimed the top spot.
However, this year, Austin has slipped in the survey’s rankings. It landed at the 10th position among the most attractive markets for investment.
The Austin market is affected by a lot of new real estate quickly hitting an otherwise smaller U.S. metropolitan area. If demand isn’t at par with supply, it could disrupt property pricing and the market’s attractiveness for investors, Mellot said.
The U.S. Federal Reserve’s policy meeting happened on Wednesday. In a conversation with CoStar News, Mellott highlighted monetary policy as the primary threat affecting investor sentiment this year.
The Fed’s decision to maintain interest rates and the absence of anticipated rate cuts in March underscored this concern.