Q4 2017 Sentiment Index — Commercial Real Estate Executives Maintain Cautious Optimism for Economic Growth Despite U.S. Tax Policy Uncertainty

Positive Sentiment About Current Market Conditions Rises
Compared to Q3           

 Roundtable Weekly Archive -  .pdf of entire Q4 2017 Sentiment Index report -

       November 30, 2017

    Media Contacts: (202) 639-8400
    Scott Sherwood or Abigail Grenadier

(WASHINGTON D.C.) —  Commercial real estate executives expect market fundamentals will hold strong throughout the year despite tax policy uncertainty in Washington, according to The Real Estate Roundtable’s Q4 2017 Economic Sentiment Index released today.   

Jeffrey DeBoer 2016 Ann Mtg x220_4790

“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.  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,” said Roundtable President and CEO Jeffrey DeBoer.

(Download the Q4 2017 Sentiment Index report)

“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. That said, 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 April by Chicago-based FPL Associates on The Roundtable’s behalf.  Download the full Q42017 Sentiment Index report here.
 
The next Sentiment Survey covering Q1 2018will be released in early February.

About The Real Estate Roundtable Sentiment Survey

The Real Estate Roundtable Sentiment Survey is the industry’s most comprehensive measure of leading real estate executives’ confidence in financial and real estate markets.  The survey, conducted by FPL Advisory Group, captures the perspectives of senior real estate executives, including CEOs, presidents, board members, and other executives from a broad set of industry sectors including owners and asset managers, financial services firms and operators.

About The Real Estate Roundtable
The Real Estate Roundtable brings together leaders of the nation’s publicly-held and privately owned real estate ownership, development, lending and management firms with the leaders of national real estate trade associations to jointly address key national policy issues relating to real estate and the overall economy. Collectively, Roundtable members' portfolios contain over 12 billion square feet of office, retail and industrial properties valued at more than $1 trillion; over 1.5 million apartment units; and in excess of 2.5 million hotel rooms.  Participating trade associations represent more than 1.5 million people involved in virtually every aspect of the real estate business.

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