Industry NewsCBRE: U.S. Investor Intentions Survey Finds a Preference for Secondary Markets

CBRE: U.S. Investor Intentions Survey Finds a Preference for Secondary Markets

DALLAS—Commercial real estate investors in the United States favor opportunistic strategies and are showing a preference for secondary markets in 2023 amid concerns about higher interest rates and tighter financial market conditions, according to the findings of CBRE’s latest U.S. Investor Intentions Survey.

The survey, which covers all asset types, finds that economic uncertainty is weighing on investor sentiment in 2023, with more than half of investors expecting to decrease purchasing activity compared with 2022 levels. Nearly a third (29 percent) of investors will target opportunistic and distressed assets in 2023 to take advantage of market conditions compared with 19 percent in 2022.

“While weakening macroeconomic conditions and rising interest rates will weigh on commercial real estate investment volumes in 2023, the amount of capital targeting the sector remains abundant,” said Chris Ludeman, global president of capital markets for CBRE. “Investors are willing to accept more risk to achieve higher returns and other metrics such as lower leverage, increased debt service coverage ratio, and once again a focus on acquiring assets at a discount to replacement cost have all been pushed to the forefront. We expect investment activity to pick up in the second half of the year as market conditions stabilize.”

Most investors expect price discounts across sectors, with shopping malls and value-add office assets expected to offer the greatest discounts. Despite changes in strategy and pricing, almost 70 percent of investors expect no change in fund allocations to real estate from last year.

Investors continue to prefer secondary markets, with Sun Belt cities the most appealing. Dallas is the top target market, followed by Austin, Miami, Los Angeles, and Nashville.

Multifamily remains the most sought-after sector (38 percent), particularly apartment complexes, followed by industrial (28 percent), led by modern logistics facilities in major markets. Grocery-anchored centers are the most popular subsector for retail investors, while office investors largely prefer Class A assets in prime locations.

In the current high-interest environment, real estate debt is considered the most attractive alternative investment, followed by build-to-rent, life sciences, self-storage, affordable housing, data centers, and student housing.

“Despite continued conservative underwriting, most lenders are currently quoting and winning new business, even though they expect new originations to decline 10 percent versus the prior year,” said Rachel Vinson, president of debt & structured finance in the United States for CBRE. “Concerns around maturity risk and more conservative underwriting criteria from traditional lending sources—focused on wider going-in and exit cap rates, and higher debt yields—will contribute to the further rise of opportunistic investors. While uncertainty continues, the need for capital, whether for tenant build-outs, basic improvement, or ESG upgrades, is certain. The question remains how long can both lenders and borrowers wait.”

Other findings from the 2023 survey, which was conducted in December 2022, include:

  • Investors cite rising interest rates, a potential recession, and limited credit availability as their greatest challenges this year.
  • Investors are hesitant to sell assets with weakening market pricing—60 percent say they will either sell less or not sell at all, while only 27 percent expect to sell the same amount as last year.
  • While investors remain committed to ESG, nearly half of respondents say that the worsening economic outlook will limit the extent to which they consider ESG criteria in their investment decisions.

RELATED ARTICLES

Accor Drives Growth and Performance in New Signings for 2025

PARIS, France—Accor shared an overview of its 2024 development activity and growth prospects for 2025. In 2024, Accor expanded its portfolio with the opening...

Hotel Seville Nomad Transitions to Hyatt’s Unbound Collection

CHICAGO, Illinois—Allen Gross, chairman of GFI Hospitality, announc­­­ed the transition of the former James NoMad Hotel to Hotel Seville NoMad, joining the Unbound Collection...

My Place Hotel-Savannah Airport/Pooler Opens

ABERDEEN, South Dakota—My Place Hotels of America has announced the opening of My Place Hotel-Savannah Airport/Pooler, Georgia, in Pooler, Georgia. The hotel is owned...

Hunter Hotel Advisors Brokers Sale of Hilton Garden Inn Louisville East

ATLANTA, Georgia—Hunter Hotel Advisors announced the sale of the Hilton Garden Inn Louisville East. HBS Investment Group purchased the property from an institutional seller...

Capitalizing on Extended-Stay Demand With the Right Brand Partner

Vinny Patel, CEO of real estate investment, development and management firm VMV Capital, has found success in the Southeastern U.S. hotel market by specializing...

AHLA: Technology Can Assist With Attracting and Retaining Hotel Workforce

WASHINGTON—As hotels continue to climb towards pre-pandemic staffing levels, they are also leveraging new tools and technologies to grow and retain their workforces and...