Commercial real estate executives appear relatively optimistic about the general state of the market in 2016, with many predicting higher than average deal volumes for their firms. When considering the adoption of new technology, most believe that the influx of CRE tech companies is revolutionizing the industry. These executives recognize that while the U.S. CRE market is recovering, there are still certain segments that are poised for significant decline.
These are some of the findings of a recent Forbes Insights report, “CIT Commercial Real Estate Outlook: Key Findings,” sponsored by CIT. In order to understand the current trends, challenges and outlook for the U.S. Commercial Real Estate industry, CIT commissioned Forbes Insights to conduct online research between Feb. 12 and March 14, 2016. Forbes Insights surveyed 201 senior executives from CRE management companies, brokers, investors, financing executives and attorneys.
• More than half, 52%, of respondents believe that their segment of the market is either strong or very strong.
• 44% of executives surveyed agreed or strongly agreed that certain segments are poised for significant decline.
• 47% of total respondents agreed or strongly agreed that the U.S. CRE markets are in recovery.
Just over 60% of executives surveyed characterize their current market posture as opportunistic, describing today’s market conditions as a mixed bag, offering both challenges and opportunities. When reflecting on the economy, they see interest rates, consumer confidence, U.S. tax rates, unemployment and the global economy, respectively, as the top five factors driving CRE investment. They express moderate, but not overwhelming, support for the government’s role in stabilizing the economy, with 48% believing a Republican win in the U.S. presidential elections would have the most positive impact on the sectors where they are presently active.
The benefits of CRE technology are clear, with most executives agreeing that these advancements are revolutionizing the industry. Despite this, many are slow to adoption, with only 11% of respondents rating themselves as “leading edge” when it comes to implementation. While they envision both positive and negative effects, most respondents agree that the stakes are higher, and they struggle with the emergence of tech-enabled entrants into the industry and the impact they are having on their CRE investments.
The majority of companies, 71%, say adequate capital is available for investment. One in four, 24%, say capital is available for “the right” deals only. When asked about financing, slightly over half of respondents say that they are lengthening the duration of their financing in an effort to lock in today’s relatively low rates over a longer period.
Executives are split on the CRE impact of baby boomers downsizing their lives, citing both the positive and negative effects on their investments. The emergence of rules mandating that low-income housing be integrated with affluent housing also delivers mixed results. Overall, those who see changing demographics as a top five driver tend to target properties with relevance to middle-income consumers.
– Hugo Moreno, Forbes Insights