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Research

Kingsley: Real Estate Remains Most Attractive Asset Class for ‘17

Industrial properties, followed by multifamily homes and self-storage properties, are of most interest.

By Poonkulali Thangavelu

Institutional investors are looking to commit $62 billion in new capital to commercial real estate investments in 2017, according to a survey by Kingsley Associates and Institutional Real Estate. This is an average reduction of 19% to their investments in this asset category compared to 2016.

“The decline in new capital flows can be largely attributed to two primary factors,” according to Jim Woidat, a principal at Kingsley Associates. “US survey respondents reported real estate holdings exceeding their target allocations to real estate, which reduces the need for new capital commitments. In addition, investors report a significant uncalled capital overhang of $47 billion, which also limits the need for new capital deployment.”

Most US investors however—72%–are still actively looking for new real estate investments in 2017. They are most interested in industrial properties, as a result of demand from the growth of e-commerce, with multifamily coming in second. Third on their list is the self-storage property type, followed by senior housing and student housing, while they are less enthusiastic about office, medical office and retail properties.

They also expect to deploy the most amounts of new real estate investment capital into “core properties”, at 33%, and “value-added properties”, at 27%. And they are slating 20% of the capital to opportunistic investments, 8% to debt products, 7% to foreign investments, and 5% to real estate securities.

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Geographically, the US remains the number one draw for both US and foreign real-estate investors. US investors saw the most drop off in interest for the United Kingdom and Northern Europe, as a result of concerns about Brexit and the overall stability of the European Union. And both US and foreign investors view Russia as the least-attractive region for new investments, based on geopolitical concerns.

“Real estate investors have enjoyed healthy returns post-global financial crisis, but it’s evident from the survey that they are showing more caution at this point in the cycle,” notes Geoffrey Dohrmann, president and CEO of Institutional Real Estate. “US investors dialed back their total return expectations for real estate from 8.7% last year to 7.4% for this year. However, on a risk-adjusted basis, respondents ranked real estate as the most-attractive asset class for the seventh consecutive year.”

About half of the US investors, at 49%, reported that real estate had exceeded their expectations for 2016, the best performance of all asset classes, which explains their continued interest in this asset category.

Respondents to the IREI survey include 113 US institutional investors and 51 foreign investors, representing a total of $741 billion in real estate assets.

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Home > News > Regulation > Groups Partner to Examine Bitcoin’s Blockchain Application in Securitization Markets
Regulation

Groups Partner to Examine Bitcoin’s Blockchain Application in Securitization Markets

Partners tout benefits of blockchain platforms to help industry comply with regulations, among other benefits.

By Chuck Epstein

The Chamber of Digital Commerce, the world’s largest trade association representing the blockchain industry, and the Structured Finance Industry Group (SFIG) have formed a strategic partnership focused on advancing the use of blockchain technology in securitization markets.

The new partnership kicked off at a meeting in Las Vegas accompanied by the publication of a white paper, “Applying Blockchain in Securitization: Opportunities for Reinvention,” and a series of educational activities.

Blockchain is an open-source software that can be used to facilitate financial operations and transaction processing. Blockchain uses a public ledger of all Bitcoin transactions. It is constantly growing as “completed” blocks are added to it — in a linear, chronological order — with a new set of recordings.

The white paper detailed five benefits of blockchain technology, including:  

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  • It provides a single, consistent information source to anyone in its network.
  • It delivers a chronological audit trail that cannot be changed. This is especially beneficial for loan origination to primary issuance, servicing, and changes in ownership in the secondary market.
  • It provides improved valuation and price discovery since it is transparent. This reduces information asymmetry and network disadvantages that some smaller entities encounter in the securitization business.
  • It provides simultaneous recording of information across the system. This eliminates time delays in the flow of information and payments in the securitization process, including in the secondary market.
  • It is secure and can mitigate fraud to preserve data quality.

Perianne Boring, founder and president of the Chamber of Digital Commerce, said the securitization process “is an ideal candidate for the efficiencies of distributed ledger technology.”

“Blockchain platforms enable the market to more efficiently comply with regulations, while at the same time allowing automation to create significant efficiencies for the role of the regulator itself. Our partnership with SFIG is an opportunity to accelerate the understanding and adoption of blockchain technology in this sector,” Boring said.

According to the group, financial institutions worldwide have invested more than a billion dollars in blockchain, and most big banks will have begun blockchain projects by the end of 2017. “There are already hundreds of use cases, ranging from international payments to securities processing, and major technology firms are offering a host of blockchain services aimed at the financial industry,” the group said.

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