Deloitte 2019 Outlook Points to Increased Allocation to Real Estate

Jim Berry, U.S. Real Estate leader at Deloitte & Touche LLP, joined the latest edition of Nareit’s REIT Report podcast to discuss Deloitte’s newly-released 2019 Commercial Real Estate Outlook.

The outlook surveyed 500 global commercial real estate investors on the factors that will drive their investment decisions in the year ahead.

Berry noted that more than 97 percent of those surveyed indicated they would increase their capital allocation to real estate in the next 18 months, despite concerns about interest rates, trade tariffs, tax reform, and Brexit uncertainty.

At the same time, investors plan to diversify their portfolio, “to capture the evolution of the real estate market due to the changing nature of work and tenant preferences,” Berry said.

Meanwhile, the Deloitte report refers to certain real estate companies as “change agents,” due to their ability to alter the view about how physical space is used today. “Every company at this point has an opportunity to advance the ball, to adopt some of these change agent-type mentalities…it’s no longer an option to sit still and follow the old models,” he said.

Berry also noted that pension fund survey respondents are planning to increase their capital commitment to real estate by 9 percent over the next 18 months—and a “significant portion” of this could be directed toward REITs.

“It’s not just the largest REITs, but probably some of the midsize and smaller REITs, that have an opportunity to capitalize on these institutional investors as they plan to expand beyond just core markets in search of additional yield,” Berry said.