AUSTIN – (Realty News Report) – Austin ranks No. 1 and Dallas No. 2 as the top targets for commercial real estate investment among U.S. metropolitan areas, 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 is the combination of a high-quality lifestyle, rapid percentage growth, some constraints on new supply, and a technology-forward economy and workforce. Austin also benefits from the scale effect; when a new company brings 500 jobs, the market impact is larger in Austin than in a much bigger market like Dallas. The last decade treated Austin well, and I believe the next decade will be even stronger.”
The survey shows a notable shift toward secondary markets in 2021 rather than coastal gateway cities. Investors are focusing on metros with strong job and population growth prospects, which can drive both equity appreciation and income growth. Sun Belt markets, in particular, are drawing significant interest.
While Austin and Dallas–Fort Worth top investor wish lists, Houston ranks 18th among favored metros, the CBRE report said.
Hot Property Types
Industrial and logistics properties are the most sought-after asset class, with 36 percent of investors naming them a top target. Multifamily follows at 29 percent; office at 14 percent; hotels at 11 percent; and retail at 10 percent.
CBRE noted a record number of investors identifying hotels as a primary interest. The hotel sector was hit hard by the pandemic, creating opportunities in closed or loan-delinquent properties that appeal to opportunistic buyers.
This month, Host Hotels & Resorts acquired the 448-room Hyatt Regency Austin in downtown Austin for $161 million in cash. “We are pleased to have completed an off-market, opportunistic acquisition of a high-quality hotel in one of the nation’s fastest-growing cities, which continues to benefit from corporate and population relocations. As travel resumes, we expect the well-located Hyatt Regency Austin to see a strong rebound driven by Austin’s leisure and business demand, anchored by music festivals, sporting events and major corporations,” said James Risoleo, president and CEO of Host Hotels, a REIT based in Bethesda, Maryland.
The survey also underscores the continued appeal of tech-driven markets. Austin, Denver, San Francisco and Seattle ranked among the top 10 markets for the sixth consecutive year.
“Strong economic fundamentals that drive rent growth are the top reason for market preference in 2021,” said Chris Ludeman, Global President of Capital Markets for CBRE. “The metros favored this year showed labor market resilience during the pandemic and a steady growth outlook. Remote work has also encouraged labor migration to relatively lower-cost markets with well-developed suburbs.”
Key Findings from the 2021 Survey:
- Risk tolerance is rising: 30 percent of investors say they are targeting opportunistic and distressed assets in 2021—a record level compared with 16 percent in 2020.
- For the first time in the seven-year history of the survey, large investors (those with more than $50 billion in assets under management) favor secondary markets over primary markets.
- Pricing is expected to be aggressive for logistics and multifamily assets in 2021, while discounts are likely for other property types.
- Investors are broadening their target set: 72 percent of respondents are actively pursuing one or more real estate alternative sectors in 2021, up from 54 percent in 2020. Life science labs, medical offices and single-family rentals are the most popular alternatives, followed 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 hosted the National Association of Real Estate Editors annual conference in 2019. Photo by Ralph Bivins, Realty News Report Copyright 2021.
For more on Texas real estate, see Houston 2020: America’s Boom Town – An Extreme Close Up by Ralph Bivins. Available through major retailers.