Nine in 10 global real estate investors anticipate converting US office properties into residential assets, according to the Association of International Real Estate Investors (AFIRE).

The US-based organisation surveyed its members and found that institutional investors and real estate fund managers believe that more than a third of office assets within their US portfolios will require upgrading to meet future occupancy demands.

Investors are also increasingly considering a variety of office transitions to other uses, including industrial storage and data centres (72%), hospitality and leisure (69%), and vertical farming (33%).

The survey found that more than 30% investors were forecasting a drop of more than 10% in office valuations, with Washington DC and the New York Metropolitan Area expected to lead the declines, followed by Atlanta, Boston and Miami.

More than two thirds (69%) believe the recent downgrading of the US long-term credit rating will not impact institutional foreign investment in the country’s real estate market. However, 82% of respondents agree that rising insurance premiums and/or declining insurance availability may prevent them from investing in certain regions, in part, a reflection of the impact of climate change on vulnerable markets.

The AFIRE International Investor Survey Q3 2023 Pulse Report was conducted in late summer 2023 and was administered by PwC.

Gunnar Branson, CEO of AFIRE, said the survey “captures institutional investor sentiment from around the world toward the US market in late 2023”.

He added: “While significant uncertainties persist, institutional investors, who benefit from a long-term horizon, see opportunity to realign their portfolios to meet the shift in asset class demands, in particular towards the continued need for a greater volume of residential properties in US cities.”

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