PORTLAND, OR—A recent survey revealed that 80% of respondents are planning to invest in value-add real estate as part of wealth-management strategies. RealCrowd recently completed the online survey of high net-worth investors.
The survey indicated these investors are also focusing increasingly more on secondary and tertiary markets to source these deals, and are relying heavily on direct online real estate platforms to do so. GlobeSt.com spoke with Adam Hooper, co-founder and CEO of RealCrowd, about his insights into the survey's most interesting tidbits.
GlobeSt.com: What are some of the key takeaways from the survey?
Hooper: We found that high net-worth investors are growing more interested in value-add real estate assets to diversify their portfolios and build wealth. As the focus of development in the real estate industry today is leaning more toward redevelopment and value-add plays, we are seeing increased demand from investors for these assets and opportunities.
The survey also revealed that that 47% of respondents want to allocate one-quarter of investment portfolios to commercial real estate, which demonstrates their affinity for and trust in the sector as a stable investment category. And we learned that nearly three-quarters (72%) of respondents are seeking transactions in secondary markets, while 64% say they have no regional preference for their investments. That speaks to the high level of competition for strong deals in primary markets, which is a sign of the industry's good health.
Regarding asset class, we found that high net-worth investors rank multifamily at the top of their real estate investment preference lists, with industrial coming in second, followed by funds, office, hospitality and retail properties. These preferences more or less align with industry trends across all investor groups.
One result that we as an online direct investment platform were happy to see was that nearly four-fifths of respondents (79%) said they choose to invest in real estate directly through an online platform like RealCrowd. To me, that indicates we're hitting the mark in meeting investors' needs.
GlobeSt.com: Why are investors shifting focus to value-add assets?
Hooper: Value-add assets provide a tremendous opportunity for investors to invest in less visible, a.k.a. not core and less expensive properties, and increase ROI after improving them. From simple cosmetic upgrades to complete redevelopment projects, these improvements can result in significant gains in property values and rental rate revenues for these investors, which is why they're so appealing. Investors also tend to feel good about buying an asset in need of updating and improving the appearance and functionality of it. These deals can make a real difference in the lives of those who use the real estate as well as the surrounding community, so value-add assets have strong appeal for social-impact investors.
GlobeSt.com: What markets are they finding most desirable?
Hooper: At this late point in the real estate cycle, investors are focusing on markets that exhibit the big three metrics in choosing properties: population growth, job growth and supply constraints. They're considering markets like Charlotte, Seattle, Denver and Portland that are attracting Millennials interested in furthering their careers. They're also zeroing in on local markets in places like Phoenix, San Diego and other parts of Southern California where Millennials like to live. Many of these markets feature geographic boundaries that limit the availability of land and opportunities for expansion, which make them more desirable.
GlobeSt.com: Based on the survey, there is a growing number of investors investing online. Why do you think that is?
Hooper: To be fair, the fact that the respondents were answering an online survey and therefore were more likely to choose direct platforms as a method of investing is partly responsible for that survey result. But in truth, just about everything in life these days has a digital component, so why not commercial real estate investing? Investors like the level of transparency these deals offer them, the amount of time it saves them over other investment methods, the convenience of doing their market research, due diligence, and transacting whenever they like and wherever they happen to be, and the amount of control they have over these investments. They also feel that they are benefiting by cutting out the middle man, which saves both time and money. The number of investors who choose direct investing through an online platform like RealCrowd will only continue to grow as technology evolves and investors seek to gain even more control over their portfolios.
RealCrowd is a direct investment online real estate platform, having hosted more than $5 billion in real estate offerings spanning more than 200 investments across 38 states.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.