Update: How the CRE investment landscape is shaping up in 2017

buildings-landscape-320x213.jpgThe year is well underway and looks to be a promising one for commercial real estate investment.

A recent survey conducted by the Urban Land Institute shows that $1.7 trillion will be coming into the CRE market this year globally—an increase from $895 billion in 2016. The CBRE Americas Investor Intentions Survey 2017 also shows a positive outlook, breaking it down sector by sector to see what’s been happening and what we could expect for the rest of the year.

These are the trends we’re keeping an eye on.

Industrial on top

Industrial is on the top of the list for preferred CRE investments. With 38% of respondents preferring industrial, it jumped 15% from last year’s survey and took the top spot away from multifamily investments.

The rise of interest in the industrial sector can partially be attributed to manufacturers’ confidence in keeping operations in the country.

Multifamily holding steady

While multifamily is no longer at the top of the list of attractive investments, it had no change in the level of interest with 28% of respondents preferring to invest in this sector. It seems that supply is beginning to catch up with the high demand for multifamily.

Real interest in this sector is being seen more in secondary markets, moving away from bigger, pricier metro areas such as San Francisco.

Office on the decline

Interest in office investments dropped to 18% from 24% last year. It’s also worth noting that the industrial sector picked up its 15% jump from both the office sector (6%) and retail (9%).

Office absorption rates dropped to 39%, the lowest seen in the last five years, indicating a decline in demand for office space and a possible inflection point where supply has caught up to demand. It’s unsurprising then that new construction in this sector has been reduced as well.

Retail in meltdown

Retail continues its decline, coming in at the bottom of the list of investment interest. Whereas the sector drew 9% interest in 2016, it’s down to 8% this year. This is thanks to the rise of ecommerce, the decline in malls, and the rise of experience and food in millennial priorities. With many property owners and companies trying to figure out what to do with now vacant retail space, it will most likely be some time before retail once again makes sense for investors.

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Topics: Industry News