The search for yield in a late-cycle environment is drawing more commercial real estate investors into secondary markets and alternative assets, according to CBRE’s Americas Investor Intentions Survey 2019.

The survey of real estate investment professionals found appetite for risk is lessening in 2019. The most common motivation for purchasing real estate this year is to secure a stable income stream (32 percent) — a much higher share than in past years — followed by expectations for capital growth (20 percent). Value-add remains the preferred asset strategy (37 percent), with interest in good secondary assets (33 percent) increasing for the fifth consecutive year. Investors are ultimately looking for a stable income stream and capital growth in acquisitions.

While Los Angeles/Southern California and Dallas/Ft. Worth maintained the two top-ranked positions for property purchases, more investors are shifting their attention to smaller markets. Several secondary markets have risen in the rankings, with Denver, Phoenix, Orlando, Nashville, Minneapolis/St. Paul and Las Vegas all ranking higher than they did in the prior survey for the third year in a row.

The survey revealed that 40 percent of respondents are actively pursuing one or more real estate “alternatives.” Real estate debt remains the most common of the niche sectors (52 percent), with self-storage, senior housing and student housing the next most popular — each favored by nearly 30 percent of investors.

“Continued strong real estate fundamentals, combined with historically deep debt and equity capital markets, provide good momentum for 2019,” says Chris Ludeman, global president, capital markets, CBRE, in a statement. “Investors are reducing risk and protecting income streams through diversification. Pricing is at or near the previous peak for most asset types in prime locations, so investors are seeking yield in secondary markets and alternative asset types.”

Investors see a global economic downturn as the greatest threat in 2019 (36 percent), with the share rising for the third consecutive year. Rising interest rates have been the second-biggest concern for the past three years (17 percent), although this share is essentially unchanged from the previous year and is less than in 2017.

Jody Barhanovich is a reporter with Institutional Real Estate, Inc.