With Uncertainty Roiling Equities, New Survey Finds 98% of Investors Plan to Put Significant Funds in Commercial Real Estate

With Uncertainty Roiling Equities, New Survey Finds 98% of Investors Plan to Put Significant Funds in Commercial Real Estate

AUSTIN, Texas, March 10, 2022 /PRNewswire/ — Even before the war in Ukraine brought more uncertainty to an already turbulent stock market, 2022 held great promise for online property investing platform CrowdStreet. Its 2022 Investor Benchmark Survey found 98% of respondents plan to make at least one private equity real estate investment in 2022, while 65% plan to invest less in stocks and bonds. While CrowdStreet raised $1.2 billion from retail investors last year—twice as much as ever before in a single year—funds raised since January 1 show it will likely outpace its 2021 performance. With Uncertainty Roiling Equities, New Survey Finds 98% of Investors Plan to Put Significant Funds in Commercial Real Estate Investors are diversifying their portfolios—and balancing risk—with commercial real estate. Tweet this CrowdStreet, the nation’s largest online private equity real estate investing platform , drew respondents from its network of accredited investors. All 1,111 survey participants were in complete agreement on their plans to invest in private equity real estate enthusiastically this year. Key survey findings showed: 66% plan to allocate more of their investment portfolios to CRE,

32% plan to make four or more CRE investments,

More than 25% would like to invest $200,000 in CRE, and

82% are interested in investing at least $50,000 in CRE.

Enthusiasm for commercial real estate investing stems in part from the conventional wisdom that Wall Street faces a bumpy ride this year as evidenced by pervasive first-quarter volatility. “Clearly, investors aren’t expecting outsize stock market gains another year in a row,” CrowdStreet’s CEO Tore Steen said. “They’re diversifying their portfolios—and balancing risk—with commercial real estate.”

Most Investor Benchmark Survey respondents had at least one year of private equity real estate investing experience, while a quarter had five or more. A plurality of these investors have made at least one investment in CRE projects, while an impressive three-quarters of those who self-identified as experienced investors have made seven or more.

One survey participant expressed forward-looking optimism that captures the mood among many high-net-worth investors regarding their portfolios: “If it proves to be a way to grow wealth beyond stock returns, I will invest more.”

What are investors’ top reasons for adding private real estate to their portfolios?

CrowdStreet’s survey responses revealed three key reasons investors are increasingly turning to real estate investing: the desire for portfolio diversification, the passive income it can offer and the ability to earn above-market returns. Investors also cited investing for the long-term and wealth preservation as further relevant reasons for investing in CRE.

But an underlying concern motivating real estate investing came from investors’ desire to temper stock market exposure “by allocating more of their portfolios to alternative investments, including real estate,” Steen said. “Given current market volatility, it’s not surprising that 35% of respondents ranked portfolio diversification first among the reasons they invest in CRE.”

What do investors value about commercial real estate investing?

When asked to rank which factors matter most when they evaluate a commercial investment opportunity, investors named the following: Cash flow. Commercial real estate properties , which can include anything from multifamily apartment buildings to medical office space to industrial warehouses, are often attractive to investors since they can potentially generate returns in two ways: through monthly rental income that may be shared with investors as ongoing cash flow, and from any appreciation when a property is refinanced or sold.

Business plan. Here, CrowdStreet’s deal review process plays an essential role, resting on an uncompromising three-step evaluation process that concentrates on the firm, the asset and how the deal is structured. Before accepting deals for inclusion on the Marketplace, sponsors must meet CrowdStreet’s criteria that run the gamut from background checks on the firm and principals to evaluating the asset and the legal documents for discrepancies. Complete business plans for each deal are also described when CrowdStreet lists the project in its Marketplace .

Risk profile. Like any investment, there is a balance between risk and reward. CrowdStreet groups investments into one of four common risk profiles: core, core-plus, value-add and opportunistic. Core and core-plus investments may target lower returns but are generally considered a “safer bet,” while “riskier” deals may target potentially greater rewards to compensate for the additional risk. As of March 4, 2022, CrowdStreet CRE investors since 2014 have successfully funded more than 615 deals; 98 of those realized have earned a 18.5% IRR and 1.49 equity multiple.

Geography. The 2022 Investor Benchmark Survey indicates a staggering 90% of investors are likely […]

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