The abundance of capital in the market is driving strong office investment this year. According to a recent poll on sentiment among office investors Real capital marketsInvestors are cautiously optimistic about the office market due to steady economic growth and the low unemployment rate. However, the length of the cycle also encourages a great deal of caution. Overall, the investors participating in the survey indicated a high level of trust in office investments.
"Office investments are mainly determined by the availability of capital." Tina Lichens, COO of Real Capital Markets, told GlobeSt.com. “It is estimated that in 2019 alone, around $ 200 billion will be available for investments in commercial real estate. While not all of it is used to purchase office property, it is an incredible amount of capital that needs to be placed. "
This capital is flooding the growth markets in the USA. Cities like Phoenix and Nashville saw population and employment growth spikes in the late cycle. "Another factor that is fueling the appetite for office investment is the steady growth of markets like Nashville, Austin, Minneapolis, Charlotte, Phoenix, Raleigh-Durham, and St. Louis, among others," said Lichens. “As these markets are growing steadily, the dynamic is changing: vacancy rates are lower, rents are rising and values are rising. Taken together, these factors make these markets even more attractive for investment. "
While investment remains strong, investors are paying close attention to a few factors that could affect office growth, particularly tariffs and trade wars. Currently, economic and employment growth is offsetting these potential concerns. "We hear a lot of discussion about where we are in the cycle, and some of the factors like tariffs and trade wars are being watched closely by investors," Lichens says. "Ultimately, however, investors are cautiously optimistic given the generally positive trends in job creation, the unemployment rate, company growth and the interest rate environment."
Because of this, office investment momentum is likely to remain strong through early 2020 and almost half of investors expect activity levels to remain stable. "The outlook for equilibrium from 2019 to early 2020 is consistent – in terms of expectations for both activity levels and pricing," says Lichens. "Our Office Investor Sentiment Report found that approximately 40% believe activity levels will remain constant."