Commercial Real Estate Execs Cautiously Optimistic About Market Conditions

"Responses to our recent Sentiment Survey reveal continued stability in commercial real estate asset values and financing options," said Roundtable CEO and President Jeffrey D. DeBoer. "The volatility in many economic measurements, coupled with the ongoing Presidential election, are creating some uncertainty in real estate markets. However, supply and demand is in balance in most markets, and the strength of the U.S. economy relative to the rest of the world give real estate leaders reason to continue to be cautiously optimistic about the coming year."

A majority of participants agreed that the availability of debt tightened significantly this quarter, with many pointing to the regulatory environment's more stringent due diligence standards as the culprit. In particular, the overlapping regulations imposed on lenders may be creating some liquidity issues in some markets and are expected to modestly reduce the availability of debt capital over the coming year while equity availability is expected to remain about the same.  Another consensus among respondents was that asset valuations should remain steady — with 71% expecting "about the same" or "somewhat higher" valuations a year from now.

The Q2 2016 Overall Sentiment Index registered at 49 — slightly down from 50 last quarter. [The Overall Index is scored on a scale of 1 to 100 by averaging Current and Future Indices; any score over 50 is viewed as positive.] The Current-Conditions Index is down three points this quarter, registering at 51. The Future-Conditions Index is now at 48, which is up three points from the previous quarter, where it registered at 45. 

DeBoer added, "Overall, we're seeing a general sense that investors are still bullish on real estate investment in the U.S.  Industry leaders are cautiously optimistic: job growth remains the most important objective followed by predictable interest rate movement and rational national public policy. The elections create uncertainly across the economy, but priority policy issues for real estate — such as growth oriented tax reform; appropriate regulation of financial markets; sustainability incentives; and safety and security information sharing — are not partisan issues.  Our policy priorities reflect non partisan goals of healthy, safe, educated communities."

Data for the Q2 survey was gathered in April by Chicago-based FPL Associates on The Roundtable's behalf.  For the full survey report, visit www.rer.org/Q2-2016-Sentiment-Index/

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SOURCE Real Estate Roundtable

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