A majority of investors in a new survey expressed cautious optimism in the U.S. real estate market in 2016, KPMG reported Wednesday.
Ninety-one percent of senior executives polled August through October said they expected real estate fundamentals to be about the same or better during the year ahead.
However, they were less bullish than in the previous year’s survey, suggesting, KPMG said, they believe the U.S. economy will start to slow.
They voiced concerns about the implications of rising interest rates and geopolitical risks.
“The respondents are understandably unsure if the pace of Fed rate increases will take away the punch bowl,” KPMG’s chief economist Constance Hunter said. “Although the U.S. will face global headwinds, domestic demand looks strong enough to keep the economy growing in 2016 at a 2.5% rate.”
The survey found that investors were taking fewer risks and adjusting their portfolios in preparation for the flattening or downturn ahead.
The poll results showed investors were looking for less risky opportunities, for instance, by shifting from ground-up condo development to urbanization-driven multifamily properties that might not have as significant a downturn.
Health care development should also experience major investment in 2016, thanks to increased demand from aging baby boomers. Fifty-three percent of respondents expected “significant” growth in this sector.
Executives surveyed fretted that available capital far exceeded opportunities to put it to use, a trend that has driven up prices in primary markets and forced investors to look elsewhere.