A majority of real estate industry leaders polled plan to increase their U.S. investments this year, as they expect continued growth in the U.S. real estate market in 2017 and beyond, according to KPMG's 2017 Real Estate Industry Outlook Survey: Real Estate Expansion Lives On.
Fifty-two percent of real estate executives polled believe that improving real estate fundamentals in 2017 will be the biggest driver of their company's revenue growth. Ninety-one percent of investors are bullish on access to equity capital, with 25 percent expecting an improvement in 2017 and 66 percent believing that the positive trend will remain the same. Fifty-one percent of survey respondents also 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 Greg Williams, National Sector Leader, Building, Construction & Real Estate, KPMG LLP. "Although prices of Class A assets in the U.S. are high and yields are lower, the promise of reliable returns leads to sustained interest in the sector overall, especially when compared to other global markets."
2017 Strategic Initiatives for U.S. Real Estate Companies
According to the survey, 41 percent of real estate company executives are planning for a significant investment in organic growth in 2017, including product development, pricing strategies and geographic expansion.
"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 Phil Marra, National Real Estate Funds Leader, KPMG LLP. "We also expect to see an influx of new investment in real estate, both from existing investors as well as new entrants."
Fifty-eight percent of survey participants also indicated that they are pursuing cost-related strategies to improve bottom-line results, including the implementation of new technology to address inefficiencies and process improvements.
Three Uncertainties Real Estate Executives Will Face in 2017
- Regulatory: The new U.S. administration's intent to lower taxes, deregulate business and increase infrastructure expenditures, may lead to job creation and consequently to increases in homebuilding and home sales. The promise to bring companies back to the U.S. may increase demand for office space, manufacturing facilities, data centers and other property types.
- Interest Rates: Higher interest rates may impede first-time home buying, but a healthy economy may lead to sustained job growth and potentially to increasing activity in the multi-family, retail and industrial sectors.
- Cybersecurity: Approximately half of the 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: Tenants' vulnerability to intrusions through connected technologies such as smart alarms, stealing of tenants' personally identifiable information (PII) maintained by property managers, and targeting of internal systems for their data or even their cash, such as REIT's confidential information on financing deals.
About KPMG LLP
KPMG LLP, the audit, tax and advisory firm (www.kpmg.com/us), is the independent U.S. member firm of KPMG International Cooperative ("KPMG International"). KPMG International's independent member firms have 189,000 professionals, including more than 9,000 partners, in 152 countries.