AFIRE, the association for international real estate investors focused on commercial property in the United States, has released its AFIRE International Investor Survey: Q1 2023 Pulse Report, underwritten by Holland Partner Group. The survey, conducted in early 2023, captures the view of institutional investors, who continue to see the U.S. as a preferred destination relative to Europe for real estate investment across property types, led by multifamily and industrial.
Key Findings:
- US market shows stability as preferred global destination for investment with allocations up 6% from 2022, relative to a 5% decline in European investment
- Multifamily and industrial lead preferred property types, with office as leading concern for investors
- New York returns to number one spot for preferred investment among U.S. cities, up from fifth in 2022; London remains top among global cities
- 97% of investors agree that continued interest rate rises weigh on access to capital, limiting reasonable financing and impeding transactions
- Hospitality rises as an attractive property type for investment among 43% of investors
- 86% of CRE investors believe that climate risks are not yet reflected in valuations
“The AFIRE International Investor Survey: Q1 2023 Pulse Report captures institutional investor sentiment at a moment in time; early 2023,” said Gunnar Branson, CEO of AFIRE. “While continued rising interest rates and the future of office are identified as areas of concern at this time, investor’s long-term horizon enables them to balance these against opportunities, in particular the relative strength of the U.S. real estate market as a preferred global destination for investment capital.”
The report, published each year over more than three decades, provides a survey of AFIRE’s nearly 175 member organizations from 25 countries with approximately $3 trillion AUM, and serves as a timely and trusted indicator of global investor sentiment towards US real estate.
The U.S. market shows stability as a preferred global destination for investment with allocations up 6% from 2022, relative to a 5% decline in European investment. However, continued interest rate rises weigh on access to capital, limiting reasonable financing and impeding transactions, as a majority of investors state agreement with Chatham Financials’ January 2023 rate projections.
Investors identified multifamily and industrial as the most attractive property types, and with support for multifamily a continuing trend, some 40% agree they would be willing to accept a lower expected rate of return in order to invest in more attainable housing.
ESG and sustainability have been prominent areas of interest to investors in recent years and remain a top-three area of concern, including 86% of respondents who see a significant disconnect in how the industry is pricing climate risks in its proformas and valuations.
New York regained the top U.S. spot for investment in 2023, displacing the previous top three cities from the past several years: Atlanta, Austin, and Boston. While it remains to be seen if this indicates a renewed faith in gateway markets, secondary and tertiary market trends continue to be key to the broader US market. Internationally, London remains the top global city for planned investment.
The AFIRE International Investor Survey: Q1 2023 Pulse Report was conducted in early 2023, and was administered by the research team at PwC LLP, collecting responses from within the AFIRE membership and community, including institutional investors, fund and investment managers, family offices, publicly listed companies, and related services.
“The AFIRE International Investor Survey: Q1 2023 Pulse Report helps the real estate community gain meaningful insight into the investment headwinds and opportunities ahead, and with important perspective from our colleagues around the globe,” said Clyde Holland, Executive Chairman of Holland Partner Group. “Holland Partner Group is proud to provide sponsor support for this invaluable survey.”
