New Study Reveals 87% of Institutional Investors Expect More or Similar Investment Levels in Commercial Real Estate in 2021 Compared to 2020
FTI Consulting and REFI Release Joint Study on COVID-19’s Impact on Investment Trends and the Expected Recovery
“Our research shows how varied the expectations for the recovery across commercial real estate sectors are,” said
- In the short-term, 77% of respondents said they were attracted to traditional asset classes, with another 39% interested in debt.
- Looking long term, traditional assets classes are the favorite, with 81% of respondents indicating so. However, 39% also said they were attracted to specialty housing such as affordable housing, senior housing and student housing.
- The industrial sector — which has remained relatively stable throughout the pandemic — is expected to recover the quickest, with 75% of respondents predicting a quick, decisive V-shaped recovery for the asset class. Another 13% of respondents expect a U-shaped recovery for the sector.
- For urban multifamily assets, 56% of institutional believe the recovery will be U-shaped, while another 15% expect to see either a V-shaped or W-shaped recovery, which shows a quick recovery, followed by a downturn, and then another quick uptick.
- In suburban multifamily, 41% foresee a V-shaped, quick recovery; 33% foresee a U-shaped recovery; and 22% predict a W-shaped recovery.
- For office, a U-shaped recovery was strongly predicted for both urban (49%) and suburban (48%) assets; only 7% expect to see a V-shaped recovery in urban office, and 21% expect a V-shaped recovery in the suburban office market.
Jahn S. Brodwin, a Senior Managing Director and Co-Leader of the Strategic and Transaction Advisory group within the
The survey revealed expectations for a far slower recovery of the retail and hospitality sectors:
- Only 1% of respondents expect a quick revival of high street retail and mall shopping. For shopping malls, 70% predict an L-shaped recovery.
- Fifty-eight percent of respondents foresee a U-shaped recovery, and 16% of respondents expect a V-shaped recovery in neighborhood shopping.
- The hospitality sector is projected to make a slower rebound, with 75% predicting a U- or L-shaped recovery for that asset class.
The 2021 Outlook
The research also revealed that because other kinds of investments will be more turbulent as a result of market volatility, institutional investors may remain keen on long-term commercial real estate investment: 87% of respondents said they thought there will be more or similar amounts of institutional investment in 2021 than in 2020.
With 38% of investors seeing distress in the commercial real estate market in 2020 and 54% expecting to see it in 2021, institutional investors foresee new opportunities in the marketplace.
“Institutional investors have the capital and fortitude to play the long game and weather the storm, which will create opportunity,” Herrenkohl said. “Real estate continues to be a good hedge for many investors looking to manage risk and diversify their portfolios.”
REFI Global conducted the survey for
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