Commercial Real Estate Executives Maintain Cautious Optimism for Economic Growth Despite U.S. Tax Policy Uncertainty

"Recent tax reform efforts in Congress are significant steps toward tax reform, yet a final bill that may eventually emerge from a bicameral conference must encourage capital formation and help maintain the strength of our capital markets," said Roundtable President and CEO Jeffrey DeBoer. "As our Q4 Index shows, 2017 was a positive and productive year for our industry. Asset values are high, and debt and equity capital remain widely available," DeBoer added.

The Roundtable's Q4 2017 Sentiment Index registered at 53 — a three point increase from the 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.] This quarter's Current Conditions Index of 53 increased two points from the previous quarter. This quarter's Future Conditions Index of 52, increased by four points from the previous quarter.

The report's Topline Findings include:

• Despite the fact that fundamentals continue to hold strong, the commercial real estate industry appears to have entered a period of caution driven by concerns regarding cycle timing.
  
  
• Most do not expect current real estate market conditions to change materially in the near-term. That said, the industry is closely watching proposed tax reforms and reserving predictions for the coming year until greater clarity is achieved.
  
  
• High quality assets in core, urban locations continue to be aggressively priced. However, many still suggest that there are good deals to be found. More broadly, real estate pricing is still seen as attractive relative to other asset classes.
  
  
• Many respondents cite difficulty sourcing new equity commitments from limited partners. While this has always been perceived as a challenging undertaking, the market's wariness of cycle timing is exacerbating the difficulty.

Thirty-nine percent of survey participants report Q4 asset prices today are "somewhat higher" compared to this time last year, suggesting primary markets are holding strong with the broad availability of debt and equity in the market. However, with 54% of respondents said they expect values to be "about the same" one year from now, pricing may remain steady throughout the course of the next year.

DeBoer added "The commercial real estate industry is a positive contributor to America's economy. As Congress continues to work toward comprehensive tax reform that supports healthy and balanced real estate markets, the commercial real estate industry should be well-positioned to put more people to work as business investment accelerates and the broader economy improves."

Data for the Q4 survey was gathered in October by Chicago-based FPL Associates on The Roundtable's behalf.  For the full survey report, visit www.rer.org/q4-2017-sentiment-index/

SOURCE Real Estate Roundtable

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