Investors Accepting More Risk

A PwC Real Estate Investor Survey of 31 commercial real estate markets showed that average overall capitalization rates have decreased in 27 of them. The decrease has sparked interest in secondary locations, Class-B properties, and value-added Class-A plays, suggesting that both investors and lenders are gaining more confidence in the overall performance of both the economy and the real estate industry, according to the annual poll conducted by the U.S. real estate advisory practice.

Although buyers are not rushing in droves to acquire noncore assets and offerings in secondary markets, a growing number of investors are taking risks now that once-scarce capital is becoming available again, the survey determined.

Respondents cited a “greater sense that the industry has bottomed” as the main catalyst for investors’ willingness to look for buying opportunities beyond either core markets and trophy assets or vastly distressed properties.