In CBRE Survey, Austin & Dallas-Fort Worth Names as Top CRE Investment

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The pandemic situation has been challenging in all sectors. It is especially true for the real estate sector as there was a significant reduction in the number of newly built properties.

After the early trouble days, the real estate market was expected to expand and grow this year, with most market shares in two preferable Texas metropolitan – Dallas, Fort Worth, and Austin.

The world’s largest real estate brokerage firm CBRE recently performed a survey of about 150 American-based investors. The survey was conducted between 9 December to 2 February.

It was the first time in 7 years of survey wherein the large investors with more than $50 billion assets under management plan were asked to shift their focus on the secondary market instead of the primary ones. Sun Belt, among all, was the most appealing.

With all the changes, Austin moved ahead of Los Angeles to gain the top spot this year. The results of America’s investor intention survey revealed on Thursday clearly showed the optimism among the well-capitalized buyers.

They are all on a hunt for distressed and opportunistic real estate even when the sellers dominate the market condition. The global president of capital markets, CBRE Chris Ludeman, in his statement, said, “the current situation has led to tough competition among the investors.

In the current scenario, American investors are more aggressive towards their purchases and are ready to accept higher risks to achieve better returns. This is probably because of the stable economic environment, which has great support from the government, and the belief that the capital will stay abundant in the foreseeable future.

The equity markets have given a sign of the increasing inflammation expectations during the survey period of commercial real estate investors. However, it does not appear to be a concerning thing shortly”.

The survey results found the sentiments and activities of the investors began to improve during the second half of 2020 after the time the country was closed temporally a year ago. The recovery is expected to get better with time as the vaccinations are getting more widespread.

During the survey, about 30% of the investors said they are determined to purchase distressed and opportunistic assets in 2021, which will be 16 % more than the previous year.

Although the sellers dominate the current market, over 70% of respondents have the strong determination to buy at least 20% more than what they purchased last year, and the only 30% available to sell 20% more than their sales last year.

This would create a massive difference in the pricing, especially for the multi-family and logistic properties. The survey found that investors expect the price to be aggressive with various discounts anticipated on other property types.

The given scenario presents investors with an opportunity to purchase various properties with popular targets like medical offices, science labs, and single-family rentals. Various other centers like cold storage facilities and data centers were among the popular choice for purchase during the survey.

The CBRE, as a part of its industries survey, presented the top 10 real estate markets of the country. Among all, Austin city tops the list of the investor’s preferable market. The preference was visible from various industry group reports, followed in order of preference by the Dallas Fort Worth area, Denver, Phoenix, and Los Angeles.

The CBRE survey revealed it is the Sun Belt that gained the interest of the investors than any other getaway markets. It was because of the intense job and population growth prospects which could bring in higher returns.

Austin has taken the top spot from Los Angeles to become the most preferred market of 2021, which is buoyed by the proven labor market resilience during the pandemic situation and steady growth outlook.

The Sun Belt markets were the best-performing among the metropolitan areas wherein there were minor cases of lost jobs in 2020. Further, Miami and Denver also gained great response in the market ranking of CBRE survey with the most significant number of people moving to these cities.

As per the author of the CBRE survey, remote working has dramatically increased the labor migration trend into the low-cost markets with properly developed suburbs.

The rankings further revealed the sustained appeal for the tech-driven needs. In the sector, Boston, San Francisco, Denver, and Seattle are among the top 10 markets for the sixth straight year.

Austin, known as a tech town is a home for tech giants for decades. The city even has Google’s office since 2007, an Apple store since 1996, and a Samsung campus since 1996. The city’s reputation has grown tremendously over the past year, with Tesla putting up a $1.1 billion factory in Austin, which was followed by a corporate relocation of companies like Digital Realty Trust and Oracle from California.

According to Colliers International, Creighton Stark, the demand for the real estate is relatively high now and is expected to grow as a company will prefer to be in the Dun Belt.

While the vice-chairman of New Marks Texas Investment, John Alvarado’s team, said the interest of the investors in the Austin market is so strong that a brokerage firm has decided to hire a broker from New York City to set up the shop in Austin. The Austin market has never seen a decline in pricing as it is the most aspirational market of Texas.

This sentiment is shared among various other real estate brokers working in the Boston market with a long-time investment broker Mike McDonald, the vice-chairman in Cushman & Wakefield capital market group. In a recent interview, he said Austin undoubtedly is one of the best cities for investors in America.

The CoStar’s director of market analysis for Central Texas, Tenenbaum, said even the most popular cities come with challenges. Like any other metropolitan area, Austin was hit hard by the pandemic situation.

This resulted in an excess amount of office space readily available for sublease while there are also new office constructions underway, which the would-be investors shouldn’t ignore.

He further mentioned looking at the current data of Austin it is clear that there is a precautious position then what other survey has revealed. He expects a growing demand for all types of real estate in Austin.

But the question is how much demand will increase in the city and how will it balance out the supply hitting the market.

The managing partner of Dallas based Goodwin Partners, Evan Stone, said – even with weakness in the commercial office market with great tenants backing away from their new space, fuelling the increased space found in both Dallas and Austin, there is still a belief that the excess space will be absorbed in a matter of two to three quarters.

Conclusion

Given the current real estate market scenario in Austin, Texas, investing there will be highly beneficial. If you need any financial assistance, you can contact Private Capital Investors to get a commercial real estate loan. They are the best company who can offer you adequate assistance to ensure you make a good purchase.

Want to learn more? Get in touch with us today.

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