JP Morgan Picks Its Best CRE Categories For Investment
JP Morgan sees an array of sectors in the US that are benefiting from high user demand and will perform well in 2022, according to its 4th annual Global Alternatives Outlook.
The report is based on the opinions of CEOs, CIOs and strategists from JP Morgan’s $200 billion-plus alternatives platform. It provides a 12- to 18-month perspective on the trends influencing their respective markets, as well as their most promising investment ideas and their thoughts on the underappreciated risks investors may face.
Logistics, Multifamily, Outdoor Industrial Storage Top the List
Logistics properties (particularly infill logistics assets in the so-called last mile between urban storage facilities and consumers); suburban multi-family and single-family housing in Sunbelt states; campus-like clusters (or nodes) of amenity-rich offices for the technology sector; and industrial outdoor storage facilities (including truck terminals, parking and equipment storage) in key urban locations, are set to flourish.
Deeper into 2022, JP Morgan believes that “contrarian investment opportunities in stressed corporate and retail subsectors may start to emerge,” according to the report. “Leasing markets for offices are likely to recover slowly, potentially creating refinancing challenges for asset owners. If declines in asset values overshoot the intrinsic development costs associated with these properties, opportunistic investments in offices may become highly attractive.”
Although contrarian plays are already apparent in retail, this sector is very different, JP Morgan’s report stated.
Core US Real Estate in ‘Sweet Spot’
Economic growth and inflation create a “sweet spot” for core real estate in the US, the report said.
Cash flow-generating assets are likely to become increasingly expensive in 2022 as the real estate market becomes more crowded, according to the report.
At the same time, long-term megatrends, such as the surging popularity of e-commerce transactions and, in the US, population migration to Sunbelt states, continue to drive demand for niche real estate assets, according to the report.