With options included in REITs, ETFs, private real estate funds, fractional investments and other structures, there is no shortage of ways for accredited investors to access commercial real estate. But it turns out that there are some disconnects between how commercial real estate professionals and wealth advisors view the activity of accredited investors in the market.
To measure this feeling, WMRE And WealthManagement.com surveyed more than 400 wealth advisors and commercial real estate professionals on their perceptions of accredited investor activity.
Commercial real estate professionals have more average stocks and dollar values devoted to real estate when it comes to portfolios of accredited investors. While both financial advisors and commercial real estate professionals estimated an average of $6.3 million in dedicated investments for the sector, the estimated retail investor mean was $11.0 million versus the $11.0 million identified by financial advisor respondents. $23.2 million for commercial real estate professionals. Similarly, while financial advisors estimated that about 14 percent of retail investors’ portfolios were devoted to commercial property, real estate professionals estimated nearly double that amount, saying that 25 percent of the portfolio was allocated to the sector. went.
Furthermore, while both financial advisors and commercial real estate professionals agreed that allocations to income-producing assets were not decreasing, they disagreed as to whether allocations were increasing or stagnant. Overall, 47 percent of financial advisors said that accredited investor allocations to commercial real estate are increasing while 48 percent said they were flat. Meanwhile, 76 percent of commercial real professionals said such allocations were increasing and just 21 percent said they were flat.
Another disparity between the two survey groups is the perception of which type of investment vehicle accredited investors are most interested in. Wealth advisors tout real estate ETFs as the most popular option, followed by private equity real estate funds and publicly traded REIT stocks. Meanwhile, commercial real estate professionals said direct investment in physical, multi-tenant real estate was the most popular vehicle, followed by direct investment in single-tenant property and private equity real estate funds.
Similarly, the two groups were split on what types of assets the accredited investors gravitate towards. Commercial real estate professionals point to multifamily and industrial/logistics as the two most popular types. Overall, 79 percent of commercial real estate respondents said accredited investors prefer multifunctional properties and 74 percent say industrial/logistics. (Respondents were allowed to choose more than one property type.) Commercial real estate viewers also pointed to self-storage (46 percent) and medical office (38 percent) as the next two most popular options. Did.
However, Wealth Advisors provided a more balanced analysis. Multifamily is still at the top, but only 51 percent of advisors said it is an asset type preferred by accredited investors. It was followed by industrial/logistics (44 per cent) and self-storage (42 per cent). Financial advisors also pointed to data centers (39 percent), while only 22 percent of commercial real estate professionals selected that property type.
Another difference between the two groups was that commercial real estate respondents said that accredited investors have preferences for primary markets (on secondary and tertiary) and for core and core-plus opportunities (value-added, opportunistic and distressed). , while financial advisors had more similar responses to market types and pointed to opportunistic assets as the preferred investment type over core or core-plus.
One point where the two audiences agreed, however, is that the typical returns that accredited investors are seeking on commercial real estate investments are in the range of 10 percent to 15 percent.
These results are part of a broader view of how commercial real estate professionals and wealth advisors perceive recognized investor interest in real estate investing. A full version of the report will be published this spring.