Commercial real estate professionals are gathering in New York City this month for the C5 Summit, Sept. 27–29. The event, hosted by the National Association of REALTORS®, features sessions conducted by real estate leaders and decision makers, including Gunnar Branson, CEO of the Association of Foreign Investors in Real Estate.
Here, Branson discusses his organization’s March 2021 survey of 100 leading investors and institutions and why they’re optimistic about investing in U.S. real estate markets.
What Investors Want
“The No. 1 most significant finding was the overwhelming support for environmental, social, and governance criteria,” Branson says. Thirty-one percent of respondents said new investments had to explicitly meet certain ESG requirements, and 62% indicated ESG requirements are important, although not required for new investments.
“Much of ESG revolves around environmental issues, which is where people in real estate have spent the most time,” Branson continues. ESG is not only responsive to investors’ priorities, but it also supports sustainable buildings, which make more money. “Tenants are willing to pay more to be in a healthier place.”
Another key optimistic finding is the “incredible appetite for investing in U.S. real estate, which is greater than it was in 2019,” Branson says. Three in four respondents report intentions for a net inflow of capital for U.S. real estate—a trend that’s set to continue over the next five to 10 years.
Cities and Property Types in Demand
Austin, Boston, and Dallas—tertiary, primary, and secondary cities, respectively—are the top three U.S. cities for planned investment in 2021. “With Austin, you’ve got growth, young people, and technology companies,” Branson explains. “That suggests growth that will take place over an extended period of time.” In fact, those—especially medical technology in Boston and Dallas—prevail in all three top cities, he adds.
Institutional investors “are overwhelmingly interested in multifamily housing,” Branson says. “They are seeing the same housing shortage we see, and they are more interested in real estate that’s affordable and less interested in the top of the luxury category, as it has been overbuilt in certain areas.”
Other cities could follow in the footsteps of Austin, Boston, and Dallas if they start changing zoning restrictions, he says. Some municipalities still have restrictions from the 1950s intended to keep multistory buildings from being built, and concerns about density linger.
“But if you want to have a thriving tech community, you want everything close,” Branson says. “That means you’ve got to be able to allow people to build close.”