Q1 2018 Sentiment Index — Commercial Real Estate Executives Positive Despite Cautious 2019 Outlook

Positive Sentiment About Current Market Conditions Holds Steady            

 Roundtable Weekly Archive -  .pdf of entire Q1 2018 Sentiment Index report -

       February 9, 2017

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

(WASHINGTON D.C.) —  Commercial real estate industry leaders continue to acknowledge positive conditions in the economy and current real estate markets, while expressing some caution about 2019, according to The Real Estate Roundtable’s Q1 2018 Economic Sentiment Index released today..   

Jeff DeBoer  x225 Spring Jan 2018 SOI_6987

Real Estate Roundtable President and CEO Jeffrey DeBoer noted, "Participants in our Q1 Index survey also report that current market conditions may not last throughout next year.  In the meantime, The Roundtable plans for the remainder of this year to work with Congress and Treasury to ensure that the Tax Cuts and Jobs Act is implemented effectively.  We also look forward to working with policymakers and the Trump Administration on a national infrastructure plan that will create more jobs and further stimulate the American economy."

(Download the Q1 2018 Sentiment Index report)

"As our Q1 Index shows, commercial real estate executives continue to anticipate strong near term asset values and capital availability," said Roundtable President and CEO Jeffrey DeBoer. "Strong, growing commercial real estate markets go hand in hand with overall positive economic growth. Moreover,  healthy commercial real estate markets directly benefit local communities by providing significant revenue to support local budgets and services," DeBoer added. 

The Roundtable's Q1 2018 Sentiment Index registered at 54 - a one point increase from the last quarter of 2017. [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 57 increased four points from the previous quarter. This quarter's Future Conditions Index of 51, decreased by one point from the previous quarter. 

The report's Topline Findings include: 

  • While the Q1 index came in at 54, there is a noticeable gap between the scores for current conditions (57) and future conditions (51). Responders are feeling comfortable about the stability of the real estate market in 2018, but many expressed concerns about what the market may look like in 2019. 
  • With asset values nearing perceived peaks in gateway cities, the real estate community has demonstrated discipline many feel was absent in the previous cycle. Debt and equity sources of capital are making thoughtful, risk-weighted decisions. 
  • Asset values continue to increase in secondary and tertiary markets as investors chase yield. In gateway and coastal cities, many responders feel that markets are nearing peak values. 
  • For high quality investments in primary markets, responders feel there are many sources of debt and equity capital. Many responders suggested alternative lending platforms are providing increased competition. 

Thirty-eight percent of survey participants report Q1 asset values today are "somewhat higher" compared to this time last year, suggesting primary markets are peaking, with increased accessibility to debt and equity capital in the market. However, with 57% of respondents said they expect values to be "about the same" one year from now, pricing may remain at peak value throughout 2018. 

DeBoer noted, "Participants in our Q1 Index survey also report that current market conditions may not last throughout next year.  In the meantime, The Roundtable plans for the remainder of this year to work with Congress and Treasury to ensure that the Tax Cuts and Jobs Act is implemented effectively.  We also look forward to working with policymakers and the Trump Administration on a national infrastructure plan that will create more jobs and further stimulate the American economy."

Data for the Q1 survey was gathered in January by Chicago-based FPL Associates on The Roundtable's behalf.    
 
The next Sentiment Survey covering Q2 2018will be released in early May.

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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