AUSTIN – (Realty News Report) – Austin ranks No. 1 and Dallas ranks No. 2 as the top targets for commercial real estate investment among American metros, according to CBRE’s 2021 Americas Investor Intentions Survey.
“Austin has become the clear darling of investors in the post-pandemic world,” said Russell Ingrum, vice chairman with CBRE. “What makes Austin attractive to investors is the unique combination of a high-quality lifestyle, high volume growth on a percentage basis, some barriers to new supply and a tech forward economy and workforce. Austin also benefits from leveraging its smaller numbers. For example, if Dallas and Austin each attract a new company that brings 500 new jobs, the impact on Austin is significantly larger due to the smaller size of the market. The last decade benefitted Austin tremendously and I believe the next decade will be even better.”
The survey found that more investors are prioritizing secondary markets in 2021 (as opposed to coastal gateway markets), particularly those with strong job and population growth prospects, which can translate into greater potential for both equity and income growth. Sun Belt markets are the most appealing.
While Austin and Dallas-Fort Worth are hot, Houston ranks No.18 on among investors, the CBRE report said.
Hot Property Types
Industrial and logistics properties are the most sought-after with 36 percent of investors ranking that sectors as a top target. It was followed by multifamily (29 percent); office (14 percent); hotels (11 percent) and retail at 10 percent.
CBRE reported that a record number of investors placed hotels as their primary interest. The hotel industry was heavily damaged during the pandemic and the interest level is high for hotels that are closed or delinquent on their loans.
Earlier this month, Host Hotels & Resorts acquired the 448-room Hyatt Regency Austin in downtown Austin for $161 million in cash. “We are excited to have executed an off-market, opportunistic acquisition of a high-quality hotel in one of the nation’s fastest growing cities, which continues to be a top beneficiary of corporate and people relocation. As travel resumes, we expect the well-located Hyatt Regency Austin to benefit from a strong rebound led by Austin’s multiple leisure and business demand drivers that are anchored in world-renowned music festivals, sporting events and blue-chip corporations,” said James Risoleo, president and CEO of Host Hotels, a REIT based in Bethesda, Md.
The CBRE survey findings also reveal the sustained appeal of tech-driven markets. Austin, Denver, San Francisco, and Seattle ranked among the top 10 markets for the sixth straight year.
“Strong economic fundamentals driving rent growth are the number one factor for market preference in 2021,” said Chris Ludeman, Global President of Capital Markets for CBRE. “The metros most favored by investors this year were buoyed by proven labor market resilience during the pandemic and a steady growth outlook. Remote working has also boosted labor migration to relatively low-cost markets with well-developed suburbs.”
Key Findings from the 2021 Survey:
- In a clear sign that risk tolerance is growing, 30% of investors say they are targeting opportunistic and distressed assets in 2021—this is a record level and compares with 16% in 2020.
- For the first time in the seven-year history of the CBRE survey, large investors (those with assets under management of more than $50 billion) are more interested in secondary markets than primary markets.
- Pricing will be aggressive for logistics and multifamily assets in 2021, while discounts will be expected for other asset types.
- Investors are expanding the types of properties on their shopping list, with 72% of respondents actively pursuing investment in one or more real estate alternatives in 2021, up from 54% in 2020. Life science labs, medical offices and single-family rentals are the most popular targets, followed closely by data centers and cold-storage facilities.
March 29, 2021 Realty News Report Copyright 2021
File: Austin Tops Investors List of Hot Markets – Dallas Second
Caption. Recreational boats cruise near the downtown Hyatt Regency Austin, which sits on the banks of the Colorado River. The hotel was the location of the prestigious National Association of Real Estate Editors annual conference in 2019. Photo by Ralph Bivins, Realty News Report Copyright 2021.
For more about Texas real estate, check out the book Houston 2020: America’s Boom Town – An Extreme Close Up by Ralph Bivins. Available on Amazon http://tiny.cc/4a2g6y