Commercial real estate execs eye multifamily, retail sectors for growth, says KPMG report

Propelled by increasing economic optimism, commercial real estate industry executives say geographic expansion will be a key focus over the coming year, according to a recent survey conducted by KPMG LLP, the audit, tax and advisory firm.

In the 2013 KPMG Commercial Real Estate Outlook Survey, 58 percent of executives said they expect their company to increase spending most on geographic expansion, up from 21 percent in last year’s survey and 11 percent from KPMG’s 2011 survey.

In the United States, executives most frequently cited the Southwest (45 percent) and the Northeast (36 percent) regions as the best commercial real estate investment opportunities. Latin America (32 percent) and Asia Pacific (21 percent) were identified as the top real estate investment opportunities outside of the United States.

“Market expansion is an important focus for commercial real estate executives as they strive to grow the top line,” said Greg Williams, national leader of KPMG LLP’s Real Estate practice. “Domestically, the Southwest and Northeast are attractive markets because they are experiencing higher job and economic growth and thus have experienced a faster recovery, with property prices in select sub-markets within these regions at or above pre-recession levels.”

Development Trends

When asked how much new development is expected to commence in the United States in 2014, multi-family was identified as the top sector with 43 percent of respondents expecting “a significant amount” to launch, down from 51 percent in last year’s survey which significantly outpaced other asset classes. Nineteen percent expect a significant amount of development in retail in 2014, up from five percent in last year’s survey, while 18 percent expect a significant amount of development in hospitality, up from seven percent in last year’s survey.

“Multi-family is still the darling, but all sectors are expected to see an increase in new development as access to financing has improved for these projects, and executives are more optimistic about the economy’s growth prospects,” said Williams.

Seventy-two percent of respondents expect the U.S. economy to either moderately or significantly improve over the next year, up from 58 percent in last year’s survey. Additionally, 84 percent said their companies’ revenue increased over the past year, while the same percentage expects it to increase next year as well.

Revenue Drivers

Acquisitions (53 percent), improving real estate fundamentals (44 percent), and geographic expansion (38 percent) were selected as the top three drivers for revenue growth of the respondents’ companies over the next three years. Class A assets in primary markets (48 percent) and development opportunities (25 percent) were identified by commercial real estate executives as the top assets they would be in the market to acquire in the next year.

“While some markets are still stabilizing post-recession, there’s a flight to safety and security, and class A assets in primary markets continue to be the surest bets,” said Phil Marra, Northeast leader of KPMG’s Real Estate practice. “In some cases, however, we are seeing fresh approaches, such as new REITs forming to address opportunities in the single-family-home rental market.”

Twenty-five percent of those surveyed said their organization is finding an ample supply of quality properties that can deliver a sufficient return at reasonable prices, with another 60 percent saying their organization is not able to find quality properties at reasonable prices.

“Given that pricing is critical to producing sufficient yields, executives are being very selective as the availability of distressed assets has slowed,” added Marra.

Pricing pressures (32 percent), lack of customer demand (30 percent), and regulatory and legislative pressure (24 percent) were cited as the most significant growth barriers over the next year.

Political and Regulatory Uncertainty

When asked to identify the issues posing the biggest threat to business models, 40 percent of executives indicated political and regulatory uncertainty as their top concern. Thirty-three percent of respondents said they did not know how evolving Federal tax policy would impact their organization’s business strategy, while 27 percent said it would decrease their capital investment. Additionally, 67 percent said that their company was only somewhat prepared to proactively manage the impact of public policy and regulatory changes.

“The political and regulatory environment continues to pose challenges and uncertainty,” said Williams. “To maximize their success, organizations should assess how potential regulations and tax policy changes will impact their businesses, and proactively manage those impacts.”

The KPMG Commercial Real Estate Outlook Survey

The KPMG survey was completed in spring of 2013 and reflects the responses of 100 senior executives in the commercial real estate industry. Based on revenue in the most recent fiscal year, 8 percent of respondents work for companies with annual revenues exceeding $10 billion, 36 percent with annual revenues in the $1 billion to $10 billion range, and 56 percent with revenues in the $100 million to $1 billion range.

About KPMG LLP

KPMG LLP, the audit, tax and advisory firm (www.kpmg.com/us), is the U.S. member firm of KPMG International Cooperative (“KPMG International”). KPMG International’s member firms have 152,000 professionals, including more than 8,600 partners, in 156 countries.

More than 295 U.S. architecture and architecture-engineering (AE) firms participated in BD+C's 2022 Giants 400 survey. As part of the Giants survey process, participating firms are asked to describe their most impactful firm innovations and noteworthy company moves in the past 12 months. Here is a collection of the most compelling business and project innovations and business moves from the 2022 Architecture Giants.

Giants 400 | Nov 9, 2022

Top 30 Data Center Architecture + AE Firms for 2022

HDR, Corgan, Sheehan Nagle Hartray Architects, and Gensler top the ranking of the nation's largest data center architecture and architecture/engineering (AE) firms for 2022, as reported in Building Design+Construction's 2022 Giants 400 Report.

Top 75 Sports Facility Engineering and EA Firms for 2022 chris-chow-yPgmYU1aZvE-unsplash

Giants 400 | Nov 8, 2022

Top 110 Sports Facility Architecture and AE Firms for 2022

Populous, HOK, Gensler, and Perkins and Will top the ranking of the nation's largest sports facility architecture and architecture/engineering (AE) firms for 2022, as reported in Building Design+Construction's 2022 Giants 400 Report.

More cities track the performance of buildings as a way to lower their carbon emissions.

Industry Research | Nov 8, 2022

U.S. metros take the lead in decarbonizing their built environments

A new JLL report evaluates the goals and actions of 18 cities.

Hotel designs feel more like homes these days Hotel design trends for 2022 *Lake_Nona_Town_Center_Wave_Hotel

Hotel Facilities | Nov 8, 2022

6 hotel design trends for 2022-2023

Personalization of the hotel guest experience shapes new construction and renovation, say architects and construction experts in this sector.

Green | Nov 8, 2022

USGBC and IWBI will develop dual certification pathways for LEED and WELL

The U.S. Green Building Council (USGBC) and the International WELL Building Institute (IWBI) will expand their strategic partnership to develop dual certification pathways for LEED and WELL.

Reconstruction & Renovation | Nov 8, 2022

Renovation work outpaces new construction for first time in two decades

Renovations of older buildings in U.S. cities recently hit a record high as reflected in architecture firm billings, according to the American Institute of Architects (AIA).

Steel structures offer faster path to climate benefits

Faster delivery of buildings isn’t always associated with sustainability benefits or long-term value, but things are changing. An instructive case is in the development of steel structures that not only allow speedier erection times, but also can reduce embodied carbon and create durable, highly resilient building approaches.

Building Team | Nov 7, 2022

U.S. commercial buildings decreased energy use intensity from 2012 to 2018

The recently released 2018 Commercial Buildings Energy Consumption Survey (CBECS) by the U.S. Energy Information Administration found that the total floorspace in commercial buildings has increased but energy consumption has not, compared with the last survey analyzing the landscape in 2012.

Buffalo Bills new stadium, 2022, architect Populous, Bowl View

Sports and Recreational Facilities | Nov 7, 2022

Gilbane, Turner, Populous tapped to design and build new Buffalo Bills stadium

The joint venture of Gilbane Building Company and Turner Construction Company, in association with 34 Group, has been selected to provide construction management of the planned new NFL stadium for the Buffalo Bills in Orchard Park, N.Y. The project team also includes the project management firm, Legends Project Development, and Populous as the designer.

Currently Reading

Commercial real estate execs eye multifamily, retail sectors for growth, says KPMG report

Tags

Architects | Nov 10, 2022

Giants 400 | Nov 9, 2022

Giants 400 | Nov 8, 2022

Industry Research | Nov 8, 2022

Hotel Facilities | Nov 8, 2022

Green | Nov 8, 2022

Reconstruction & Renovation | Nov 8, 2022

Sponsored | Steel Buildings | Nov 7, 2022

Building Team | Nov 7, 2022

Sports and Recreational Facilities | Nov 7, 2022

Most Popular Content

Magazine Subscription

Get our Newsletters

Follow BD+C: