Private equity, foreign investors and pension funds are expected to be the most active players in commercial real estate in the coming year, according to the latest survey of real estate executives by DLA Piper.
According to the global law firm, the majority of the respondents to its 2011 State of the Market Survey – 35 percent – said that they expect private equity to be the most active investor in 2012. Behind private equity, 25 percent said they believed foreign investors would be the most active and 20 percent picked pension funds. Meanwhile, REITs garnered just 16 percent of the vote, following record-high expectations for them in last year’s survey.
“I think these figures are an indication of where the readership thinks the capital is going,” said Jay Epstien, co-chair of DLA Piper’s global real estate practice. “There's obviously a lot of interest in private equity these days. The REITs were much lower than we expected.”
Epstien noted that, although REITs were active buyers and expanding their portfolios in every class of the real estate sector, the tide among commercial real estate executives has turned. “Private equity funds have done a good job of getting back in market and raising capital,” he said. “Foreign investors been very active in New York and Washington, DC in the past year or so, and people think that will continue.”
In terms of sectors seen as offering the most attractive real estate investment opportunities, multifamily outpaces all other categories by a wide margin, with 45 percent of respondents pointing towards the sector. The healthcare sector was a distant second at 23 percent, outpacing hotel (10 percent), downtown office (6 percent) and industrial (6 percent).
DLA Piper's annual survey measures the perspectives of 291 executives within the US commercial real estate market. According to the firm, the bulk of those executives surveyed feel bearish about the future of the market.
“We're in this period of uncertainty, and uncertainty is not a very hospitable place for decision-making,” Epstien said. “People are waiting until they get more clear view of what's around the corner.”