KPMG: Industry Leaders Plan to Increase U.S. Investments
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Most real estate industry leaders plan to increase their U.S. investments this year and expect continued sector growth--even beyond 2017--reported KPMG LLP, New York.
KPMG said 52 percent of real estate executives polled believe that improving real estate fundamentals will be the biggest driver of their company's revenue growth going forward. More than nine out of 10 investors surveyed called themselves "bullish" on access to equity capital. Just over half--51 percent of survey respondents--indicated that foreign investment in U.S. real estate will increase in 2017.
"A growing U.S. economy, coupled with healthy real estate fundamentals and strong access to financing and capital, make real estate leaders optimistic about a continued ‘boom' in the U.S. market," said KPMG Building, Construction and Real Estate Sector Leader Greg Williams.
Williams noted that although Class A assets currently have high prices and slim yields, "the promise of reliable returns leads to sustained interest in the sector overall, especially when compared to other global markets."
"We anticipate continued growth in the open-ended fund and debt fund spaces, as these vehicles may enable investors to obtain a stable yield, diversification, and, if they invest in an open-ended format, higher levels of liquidity," said KPMG National Real Estate Funds Leader Phil Marra. "We also expect to see an influx of new investment in real estate, both from existing investors as well as new entrants."
KPMG reported that 58 percent of survey participants said they are pursuing cost-related strategies to improve bottom-line results, including using new technology to address inefficiencies and improve processes. But real estate executives face three major uncertainties, KPMG said: regulatory changes, interest rates and cybersecurity.
The Trump Administration's plan to lower taxes and deregulate business may increase uncertainty. But it could also lead to job creation, KPMG said. And the administration's promise to bring companies back to the U.S. may increase demand for office space, manufacturing facilities, data centers and other property types.
Higher interest rates will affect real estate, but a healthy economy may lead to sustained job growth and potentially to increasing activity in the multifamily, retail and industrial sectors, the report said.
Nearly half of KPMG survey respondents said that their organizations are not adequately prepared to prevent or mitigate a cyber-attack. Cyber threats facing the real estate industry include tenant vulnerability to intrusions through connected technologies such as smart alarms, stealing of tenants' personally identifiable information maintained by property managers and targeting of internal systems to steal data.