Q2 2017 — Commercial Real Estate Executives See Steady, Strong Market Fundamentals for Q2; Uncertainty Clips Future Index

Forecast for Future Conditions Dips From Previous Quarter Due to Uncertainty in Domestic Policy and Geopolitical Landscape

 .pdf of this news release -  - .pdf of entire Q2 2017 Sentiment Index report -

    May 5, 2017

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

(WASHINGTON D.C.) — Commercial real estate industry leaders participating in The Real Estate Roundtable’s Q2 2017 Economic Sentiment Index report that market conditions are stable and will maintain slow, but steady growth over the next several months – yet many respondents are also less optimistic about future conditions due to uncertainty in domestic policy and the geopolitical landscape.    

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"As the Trump Administration and Congress continue to consider ideas for tax reform, infrastructure investment and financial regulatory overhaul, The Roundtable’s Q2 Sentiment Index is tempered by anticipation about what consequences the details of any eventual legislation could have on commercial real estate,” said Roundtable CEO and President Jeffrey D. DeBoer.  

“As the Trump Administration and Congress continue to consider ideas for tax reform, infrastructure investment and financial regulatory overhaul, The Roundtable’s Q2 Sentiment Index is tempered by anticipation about what consequences the details of any eventual legislation could have on commercial real estate,” said Roundtable CEO and President Jeffrey D. DeBoer.  “We continue to remain engaged on the policy front to communicate the vital economic role that CRE provides to communities throughout the country preserve the industry’s ability to create jobs.”

A recurring concern among respondents to the Q2 Sentiment Index released today is uncertainty about the prospects for domestic policy and how volatile geopolitical situations may influence the economy.

The Roundtable’s Q2 2017 Sentiment Index registered at 52 — three points down 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 decreased two points from the previous quarter, but rose two points compared to the Q2 2016 score of 51.  However, this quarter’s Future-Conditions Index of 50 dipped five points from the previous quarter – but is up two points compared to the same time one year ago, when it registered at 48. 

The report’s Topline Findings include:

• Many participants suggested they view market fundamentals as stable, despite potentially destabilizing factors, and predicted a continued period of slow but steady growth.

• With the new administration in Washington encountering challenges implementing their policies, there is not the same level of economic optimism as was expressed in the Q1 report. However, participants were nearly unanimous in their belief that the current real estate cycle has room left to run.

• In certain markets, asset pricing is at or near equilibrium. Retail stands out as the most challenging property type to price, followed by multifamily, which is seen to be near peak pricing.

• Capital is plentiful for the best deals. Equity and debt sources are employing greater levels of discipline for riskier investments. In what many feel is a healthy market environment, riskier deals are more expensive and may require multiple sources of capital.

Although 31% of survey participants report Q2 asset prices today are “somewhat higher” compared to this time last year, only 15% of respondents said they expect values to be somewhat higher one year from now — reflecting the view that the current market cycle is reaching a state of equilibrium.  Additionally, 48% of Q2 survey respondents said they expect asset values in one year to be “about the same” as today.  Many also noted a healthy availability of capital, predicting that inflows of private capital one year from now will be similar to today’s healthy conditions in the equity and debt markets, dependent on the quality of the property. 

Data for the Q2 survey was gathered in April by Chicago-based FPL Associates on The Roundtable’s behalf.  Read the full survey report here.
 
The next Sentiment Survey covering Q3 2017 will be released in early August.

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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