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
NEW YORK, Jan. 27, 2021 (GLOBE NEWSWIRE) -- Although the initial lockdowns at the start of the COVID-19 pandemic led to a widespread, sudden halt to many commercial real estate transactions, certain pockets of the industry are projected to have a slow, steady comeback in 2021, while others may experience a V-shaped recovery or a continuing lag, according to a survey of U.S.-based commercial real estate debt and equity investment professionals. The research was conducted by FTI Consulting, Inc. (NYSE: FCN) and Real Estate Fund Intelligence (“REFI”) during the third quarter of 2020.
“Our research shows how varied the expectations for the recovery across commercial real estate sectors are,” said Josh Herrenkohl, a Senior Managing Director and Leader of Business Transformation Services within the Real Estate Solutions practice at FTI Consulting. “The areas where investors expect a V-shaped recovery reflect the thinking that in 2021 there will be a vaccine and that everything gets back to normal. But investors also believe that the recovery for some asset classes will take either a slow, steady U-shaped recovery or an L-shaped scenario, with a further drop and no recovery for an extended period (depression).”
Among the FTI Consulting/REFI study’s key findings:
- 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 Real Estate Solutions practice at FTI Consulting, said, “The office market will be a zero-sum game over time: a shift to more remote workers, office occupants demanding more square footage per head, and select suburban offices becoming the spokes to urban hubs for the next two to three years. However, over the long term, I expect the workforce will return to urban centers.”