5 Must-Reads for the CRE Industry [March 2021]

Posted by Alex Dimitroff on Apr 1, 2021 12:56:00 AM
Alex Dimitroff

1.  Commercial Real Estate Investors Show Increased Appetite for Risk in 2021, CBRE Survey Finds

“Commercial real estate investors in the Americas are showing a clear shift in risk tolerance and a preference for secondary markets in 2021, according to the findings of CBRE’s latest Americas Investor Intentions Survey. The survey, which covers all asset types, found that investor sentiment and activity began to improve in the second half of 2020, and should continue to improve this year as widespread vaccination aids the economic recovery.” (CBRE, 3/25)

Cold storage

What you need to know:

  • Surveyed commercial real estate investors signaled an increase in risk tolerance with 30% saying they are targeting opportunistic and distressed assets in 2021. This is a record-high level and compares with 16% in 2020.
  • For the first time ever, large investors (AUM greater than $50 billion) are more interested in secondary markets than primary markets. Investors have also indicated they plan to expand the range of property types in their portfolios. 72% of respondents are actively pursuing investment in one or more real estate alternatives, like medical office or cold storage, compared to 54% in 2020.

Download the full report here.

2.  These 10 Retailers Are In Expansion Mode: Here’s Who Is Opening New Stores

“In a 180-degree turn from 2020, retailers’ expansion plans are outpacing plans to close up shop so far this year.” (CNBC, 3/21)

What you need to know:

  • According to tracking by Coresight Research, U.S. retailers have announced 3,199 store openings and 2,548 closures on year-to-date basis. For comparison, 8,953 store closures were recorded in 2020 compared to 3,298 openings. Retailers like Amazon’s Fresh stores, Ulta Beauty, and TJ Maxx plan to lead the way in 2021 store openings.
  • The rollout of the Covid vaccine and the recent stimulus has inspired confidence for U.S. retailers to open new stores. The National Retail Federation is forecasting retail sales growth between 6.5% and 8.2% with similar growth expected in the overall economy.

Read the full article here. 

3.  Q1 Survey: Commercial Real Estate Executives Express Optimism About Current and Future Market Conditions

“Commercial real estate industry leaders continue to acknowledge the effects of the COVID-19 pandemic on various asset classes, while expressing increased optimism for both current and future market conditions for the remainder of 2021, according to The Real Estate Roundtable's Q1 2021 Economic Sentiment Survey.” (PR Newswire, 3/3)

What you need to know:

  • The Roundtable’s Q1 2021 Sentiment Index registered at 59 which is a 15-point increase from the previous quarter. Any score over 50 is viewed as positive. The Future Conditions Index, which identifies confidence in future market conditions, reached 74 points for this quarter. The last time this index registered at 74 was in Q3 2010.
  • Limited transaction volume since the pandemic began has resulted in limited visibility into asset valuations over the past year. Based on transaction data, industrial assets have seen a slight uptick in values while multifamily assets are trading at a small discount to their pre-COVID values.

Download the full report here.

4.  Dodge Reports Spike in Construction Planning

“The Dodge Momentum Index rose to 149.0 in February, up 7.1 percent compared to January’s reading of 139.1. The increase marked the highest level for the index in nearly three years, according to the latest report by Dodge Data & Analytics.” (Commercial Property Executive, 3/8)

What you need to know:

  • The index’s February increase is largely due to the institutional sector which grew 26.3% since January from 83.5 to 105.4. February saw large lab developments and hospitals move into planning.
  • Commercial planning momentum remained relatively unchanged, increasing 0.1% to 184.2 in February. Overall, the commercial sector saw a 15.2% increase year-over-year. The index level suggests that developers remain confident that commercial projects will be in high demand over 2021.

Read the full article here. 

5.  Net Lease Assets Buoy Real Estate Investors

“The pandemic has turned the commercial real estate world upside-down. Large, trophy assets like condo and office towers have seen a decline in investor interest and therefor value. At the same time, some of the smallest assets into its heaviest hitters. While practically every commercial sector suffers, single tenant triple net leases (STNL) are riding the strongest fundamentals in years. Much of what we now consider essential retail happens inside these often stand-alone storefronts, turning net lease REITs into unexpected dividend leaders.”  (Propmodo, 3/1)

What you need to know:

  • The NETLease Corporate Real Estate ETF, a fund that specializes in net leases which tracks the performance of the net lease sector, delivered average compound annual returns of 12.1% since 2010.
  • After the initial Covid lockdowns were lifted in the Summer of 2020, net lease rent collection quickly recovered. Collections now total around 96% which is outperforming multi-tenant retail collections by nearly 20%.

Read the full article here.

 
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Topics: Market Update, Investment

Alex Dimitroff
Written by Alex Dimitroff

As Financial Analyst, Alex supports RRA Capital's senior managers in property underwriting, loan closing, and fund administration. Alex is a CFA Level I candidate and a recent Finance graduate from Barrett, The Honors College at Arizona State University.