Positive Sentiment About Future Market Conditions Rises
Compared to Pre-Election Q4
(WASHINGTON D.C.) — Commercial real estate industry executives are optimistic about Q1 market conditions while taking a “wait and see” approach to new Administration policies and potential tax reform, according to The Real Estate Roundtable’s Q1 2017 Economic Sentiment Index released today.
Roundtable CEO and President Jeffrey D. DeBoer said, “As our Q1 Sentiment Index shows, leaders in commercial real estate are cautiously optimistic about what policy changes may bring, yet concerned about any potential unintended consequences that could threaten real estate’s vast contributions to the U.S. economy.”
“The Trump Administration and a new Congress are aiming to unshackle the economy by focusing on growth-oriented policies,” said Roundtable CEO and President Jeffrey D. DeBoer. “As our Q1 Sentiment Index shows, leaders in commercial real estate are cautiously optimistic about what policy changes may bring, yet concerned about any potential unintended consequences that could threaten real estate’s vast contributions to the U.S. economy.”
The Roundtable’s Q1 2017 Sentiment Index registered at 55 — seven points up 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 55 increased four points from the previous quarter, and rose 1 point compared to the Q1 2016 score of 54. However, this quarter’s Future-Conditions Index of 55 rose nine points from the previous quarter and is up 10 points compared to the same time one year ago, when it registered at 45.
The report’s Topline Findings include:
• The Q1 Sentiment Index came in at 55, a seven point uptick from pre-election Q4. Reacting to the new administration in Washington, many are optimistic about potential market opportunities and the U.S. economy. Mitigating this optimism is concern around potential tax policy reforms.
• While optimism has been the most common reaction to the new Administration, many responders are employing a ‘wait and see’ approach. Most expect changes in the real estate industry as a result of the policies of the new Administration.
• Despite previous concerns about asset values nearing peak pricing, many feel that pricing has stabilized. Industrial properties are perceived as well priced while many are reporting a lessening of values for multifamily properties in gateway cities.
• Foreign capital continues to seek real estate investment opportunities in the US market. As a result, access to equity capital is plentiful. Construction lending remains challenging to secure, but for high quality, stabilized assets, financing is available with competitive terms. Asset pricing and debt constraints are concerning, general sentiment about the U.S. market is neutral to positive. Gateway markets have been identified as past peak pricing but many secondary and tertiary markets are intriguing for value-add investors.
Although 36% of survey participants said asset prices increased “somewhat higher” compared to one year ago, 43% of respondents said they expect generally flat valuations a year from now — reflecting the view that many believe pricing has stabilized for certain property types. Some also noted that inflows of private capital currently favor equity to debt, dependent on the quality of the property.
DeBoer added, “The Real Estate Roundtable and its members want to advance policies that will spur job creation and economic growth, always guided first by research, data and reasoned analysis that inform policymakers’ understanding of all issues, particularly when making choices that affect real estate. We hope our information will assist the policy discussion as lawmakers continue to charge forward on proposals that could have an enormous impact on our nation’s growth, prosperity and national security.”
Data for the Q1 survey was gathered in January by Chicago-based FPL Associates on The Roundtable’s behalf. Read the full survey report here.
The next Sentiment Survey covering Q2 2017 will 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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