Commenting on the outlook for commercial real estate investment in 2019, Thomas Schneider, co-founder BrickVest says:
“These are challenging times for the real estate market. Yield compression looks to have peaked but there are no signs of significant price corrections either. The market remains positive but increasingly cautious as nobody wants to be caught out by a big price correction. The biggest trend we are seeing is that investors are increasingly focused on income-producing assets. Value-add opportunities are becoming less appealing because in many cases investors are not being properly rewarded for the level of risk. There are also fewer value-add assets available due to rising construction costs and a shortage of capacity within the major contractors.”
“Average institutional investor allocations to commercial real estate remained at around 3.6% over 2018 and we expect this to remain around the same over the next 12 months. It seems yields may also increase slightly in 2019 as uncertainty around Brexit clears and we don’t anticipate any real pressure from significant interest rate rises. Investors may well skip a few deals in early 2019 as they wait for the Brexit dust to settle. Deals that catch the eye will need to offer a compelling long term story and can withstand a temporary market downturn. However, we are confident that investor sentiment will improve in the second half of the year.”