Real Estate Cos. More Optimistic Amid Vaccine Rollout
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Law360 (May 4, 2021, 8:02 p.m. EDT) – Commercial real estate providers have become significantly more optimistic over the past six months about the outlook for investment in this sector with the introduction of COVID-19 vaccines, and logistics and Biotechnology will continue According to a DLA Piper survey published on Tuesday evening, this should play a pioneering role.
According to the law firm’s most recent survey on the state of the market, 51% of respondents said their optimism for the next 12 months was 7 or higher on a scale of 1 to 10, with 1 being bearish and 10 being bullish.
That is a significant increase in optimism compared to the previous DLA Piper survey last fallwhen the vast majority gave 3 to 6 answers to the same 12 month outlook question, while investors turned bearish on their outlook.
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“It’s a very dramatic change in sentiment from our last poll,” said John Sullivan, chairman of US real estate and global co-chairman of real estate at DLA Piper, Law360 in a recent interview before the law firm released its latest poll. “By and large, commercial real estate in the US was in good shape prior to the pandemic. Fundamentals were good.”
“Vaccines give people confidence,” added Sullivan.
In addition to introducing the vaccine, Sullivan also noted that since the law firm’s previous survey, concerns about US trade wars, US immigration policies, and the impact of global political instability on US gross domestic product have receded.
The latest DLA Piper survey found that logistics remains the most attractive asset class as the growth of e-commerce has spurred demand for logistics space near major metropolitan areas. E-commerce retailers are increasingly demanding more space to meet delivery promises on the same day and even within two hours.
61 percent of those questioned in the last survey were optimistic about logistics.
“It was going pretty well before the pandemic,” Sullivan said of the sector. “The pandemic has only increased the desire for logistics space and increased the demand for everything online.”
Life sciences, like logistics, did well before the pandemic, and the pandemic has paid more attention to where manufacturing is taking place, Sullivan said. According to the latest DLA Piper survey, 57% of respondents were optimistic about life sciences and biotechnology.
In relation to this sector, the traditional view has been to produce where it is cheapest, but COVID-19 has changed that mindset.
“The pandemic has shed bright light on the importance of life science activity and the importance of how the distribution chain works,” Sullivan said.
Sullivan said he is also seeing signs of recovery in the apartment building, as well as in the hospitality and recreation areas. On the latter front, he pointed to the billions of dollars the Blackstone Group has invested in the hospitality and travel sectors as the private equity titan is betting on a sharp rebound in the wake of the vaccine roll out.
For example Blackstone March has partnered with Starwood Capital Group to buy Extended Stay America Inc. and a subsidiary of Extended Stay Real Estate Investment Trust for approximately $ 6 billion.
According to the latest DLA Piper survey, hotels and accommodations outperformed offices and retail in terms of investor optimism. 22% of respondents were optimistic about the hotel and lodging sector, 13% were optimistic about suburban offices, 11% about downtown offices and 9% about retail.
As investors consider which geographic markets to target over the next 12 months, cities in the Central Atlantic and South may see the most new investment.
Fifty-three percent of respondents said they were optimistic about Austin, 46 percent were optimistic about Nashville, and 40 percent said they had an eye on Raleigh-Durham, while Charlotte and Denver each received nods from 32 percent of respondents.
Sullivan said there is fierce competition for talent as companies try to locate themselves in areas where they can find skilled workers. He noted that the University of Texas’s presence at Austin was affecting investor confidence in that market, and noted that the various universities in the Raleigh-Durham area have a role in increasing investor confidence there.
“Cities like Austin and others … Sunbelt, warmer climatic cities, were booming before the pandemic. The pandemic appears to have increased in popularity,” Sullivan said. “I think we’ll see more of that.”
The latest DLA Piper survey had 173 respondents, including company executives, real estate developers, property and asset managers, real estate investors, brokers, real estate borrowers and other real estate professionals. The law firm conducted the survey between February 22nd and March 22nd.
– Additional coverage by Benjamin Horney. Adaptation by Marygrace Murphy.
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