Colliers recently released its U.S. 2021 Investor Sentiment Survey Results, an annual look at the mood of the investor community at the start of the New Year. Not surprisingly, more than half of all investors surveyed stated that they will be looking to invest in industrial properties in 2021 and only 18% expressed interest in office properties. In all asset classes, the focus is clearly on opportunistic and value-add investments. This represents a shift away from the core/long-term leased assets that had been the primary focus expected for 2020. Perhaps the most interesting observation is that no investors plan to reduce their portfolios. Portfolio growth of 20% was the goal most commonly expressed among the survey respondents.
Regarding office properties, which represent the bulk of government-leased assets, only 9% of investors expressed interest in increasing their allocations to this sector. Further, 38% stated that they would not invest in office assets in 2021.
The Biden Administration is only in its first week and it’s already apparent that Environmental, Social and Governance (ESG) issues are gaining momentum, yet 22% of investors stated that ESG will not have any influence on their investment decisions. Fortunately, 48% reported that ESG would drive investment decisions “to some extent” and 30% responded that it would drive “all decisions.” Wise federal property investors will be in that last group because we are already seeing mandates emerging that will affect federal leasing. Regarding environmental mandates, President Trump signed the massive Energy Act of 2020 on December 27th and, on his first day in office, President Biden returned the United States to the Paris Agreement. These acts, and likely additional legislative and executive actions, will trigger changes in GSA leasing policy.
Regarding social initiatives, we can expect rising union power to heavily influence federal workplace standards, especially to enable continued mobile work post-pandemic. In the governance category, Congress recently passed legislation embedded into the National Defense Authorization Act that seeks to peer into property ownership entities to reveal the true individual owners.
Though investors appear poised to pursue opportunistic and non-office assets in 2021, we see continued strong interest in stable government-leased properties. Yet the due diligence rules are shifting, and both new investors and current owners will need to stay abreast of the various ESG-focused mandates expected to emerge this year.