Current Conditions Index Increases Seventeen Points from Previous Quarter
(WASHINGTON, D.C.) — Commercial real estate industry leaders continue to acknowledge the effects of the COVID-19 pandemic on various asset classes, while expressing increased optimism for both current and future market conditions for the remainder of 2021, according to The Real Estate Roundtable’s Q1 2021 Economic Sentiment Survey released today. The report outlined the potential for growth for the industrial and multifamily sectors, while hospitality and retail continue to face challenges due to government restrictions and health guidelines.
“Throughout the pandemic real estate owners, managers, investors and lenders each have focused on mitigating the impact of the crisis on their residential and business tenants,” said Real Estate Roundtable President and CEO Jeffrey D. DeBoer. “The industry has restructured leases with tenants under stress, advocated for federal rental and other assistance, helped educate tenants on how to access relief, provided significant reforms to health related building operational protocols, and issued detailed guidance to ensure safe and effective ways to re-enter buildings.” DeBoer added, “Our Q1 index indicates that despite the extremely challenging past 12 months, industry leaders are optimistic that conditions are trending in positive way. General supply and demand market balance, functioning capital markets, and low leverage, combined with increased vaccination efforts have sparked the strong uptick in optimism. Of course all of this is threatened to be reversed if vaccinations stall overall, or if national policymakers impose new tax or regulatory burdens on the industry.”
The Roundtable’s Q1 2021 Sentiment Index registered at 59 – a fifteen-point increase from the previous 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 44 increased 17 points from the previous quarter, while this quarter’s Future Conditions Index of 74, is an increase of 13 points compared to last quarter. The last time the Future Conditions Index registered at 74 was more than a decade ago in Q3 2010.
The report’s Topline Findings include:
- The Q1 2021 Real Estate Roundtable Sentiment Index registered a score of 59, an increase of 15 points from the fourth quarter of 2020. Respondents continued to express optimism about future conditions; however, the outlook is highly dependent upon asset class and portfolio mix.
- The industrial and multifamily sectors were cited as having been the most resilient to the global pandemic, and best positioned to emerge successful in a post-pandemic environment. Retail and hospitality sectors continue to face challenges stemming from public health measures and government restrictions.
- Low transaction volume has resulted in limited visibility into asset valuations over the past year. Among the trades that have occurred, industrial assets have seen their values increase, mirroring the market overall, while multifamily properties are trading at a slight discount to their pre-COVID values.
- Capital flows within the real estate market are following the sector-specific impacts of the pandemic. Most respondents cited accessible capital markets for high quality assets, particularly in the industrial and multifamily spaces. However, out-of-favor property types and strategies with leasing and/or development exposure are finding it more difficult to secure institutional equity and financing.
DeBoer noted, “The Roundtable remains committed to working with the Administration and Congress to advance bipartisan federal measures that will accelerate the economic recovery and strengthen our resiliency in the event of future pandemics or similar threats: provide direct relief to workers and families, rental assistance for both residential and business tenants, temporary tax incentives to offset the cost of critical health and safety measures implemented by employers, and legal liability safeguards for businesses that clearly define expectations and create much-needed certainty for employers to facilitate a return to work.”
Data for the Q1 survey was gathered by Chicago-based FPL Associates on The Roundtable’s behalf. For the full Q1 report, visit here.
The Real Estate Roundtable issued the following statement regarding this evening’s nationwide event to illuminate buildings and landmarks, as part of the inauguration of President-elect Joseph R. Biden and Vice President-elect Kamala D. Harris:
The Real Estate Roundtable encourages all Americans to support the peaceful transfer of power to the new Biden-Harris Administration, and urges that the 117th Congress unify across party lines to address the critical health, economic and social challenges now facing the American people.
This evening, in association with the inauguration of the Biden-Harris administration, our nation will recognize the nearly 400,000 fellow citizens who have died over the past year due to COVID-19.
Building owners are proud to join national policy makers, religious leaders, business figures and others commemorating tonight’s event by lighting many of our buildings nationwide as part of the #COVIDMemorial.
The Roundtable is committed to work positively with our elected officials to help our nation stabilize and rebuild from the severe hardships caused by the pandemic — and to do so in a manner that affirms and more fully realizes the ideals of equality and opportunity upon which our great nation is founded.
All Members of Congress are Urged to Put Country Before Party in Coming Votes
The Real Estate Roundtable last week strongly denounced the planning, acquiescence, and participation in the baseless January 6th attacks on the Capitol and our Republic itself. The images of rioters defiling the Capitol, putting members of Congress and their staff at grave risk of harm, and resulting in the deaths of five people, shock the conscience.
In the time since this armed insurrection, we have become even more appalled and our anger is amplified by the dismissive reaction of many of our national leaders, beginning with the votes cast by a band of Senators and Representatives who continue to fuel baseless claims of election fraud by refusing to certify the clear results of last November’s election.
In response, The Real Estate Roundtable will suspend all political contributions to Members of Congress whose votes attempted to subvert the validly expressed will of the American people in selecting Joe Biden and Kamala Harris as the nation’s next president and vice president.
The Roundtable firmly backs the Senators and Representatives who put country before party and fulfilled their oaths to uphold the Constitution by certifying the Biden-Harris victory. Furthermore, we implore congressional leadership to allow the members in their caucuses to freely vote their conscience in how to deal with the current president during his waning days in office.
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“The Real Estate Roundtable strongly denounces the armed violent protestors, and their baseless election claims, who stormed the U.S. Capitol this week. The mob chaos was contrived to inflict great damage on our democracy. A member of the Capitol Hill police died bravely defending others against the attack. Thankfully, democracy again defeated anarchy.
“Those involved in plotting, acquiescing or participating in this despicable act are not patriots. They are violent lawbreakers and must be treated as such. This chaotic, seditious mob also could have inflicted serious damage to America’s fight against the deadly pandemic – a crisis that has already taken over 400,000 lives and caused enormous economic hardships.
“As we all continue to work to overcome the challenges of the pandemic we must also unify to make sure that this week’s violence is not repeated. The Real Estate Roundtable pledges to do its part. We commit to supporting efforts to bring about more measured tone and civility in policy debates at all levels of government, and policy actions that are balanced and sustainable. We intend to continue to analyze policy based on its benefit to jobs, community and opportunity. We will continue to work with policymakers representing the full spectrum of political views. However, we do not intend to help advance initiatives proposed by policy makers uninterested in seeking bipartisan consensus,” DeBoer said.
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A quarterly survey of commercial real estate industry leaders reflects optimism about market conditions, despite ongoing serious COVID-related challenges. Sentiment is somewhat bouyed by positive supply, demand and capital access, as well as hopeful expectations for a vaccine.
(WASHINGTON, D.C.) — Commercial real estate executives expressed a modest increase in optimism about market conditions, according to The Real Estate Roundtable’s Q4 Economic Sentiment Index, released today. A majority of respondents to the survey also noted that general conditions one year from now will be either “somewhat better” or “much better” than today.
Those surveyed noted particularly challenging economic conditions in the hospitality and retail sectors; market uncertainty associated with future office space use; somewhat stable multifamily markets, and relatively stronger industrial and life science markets. They cited industry fundamentals, functioning capital markets, industry-wide low leverage and modest lender debt service forbearance as factors in the industry’s ability to thus far withstand the very serious COVID-related market challenges.
“Nearly every sector of the commercial real estate industry is facing serious economic challenges due to the overall impact of the pandemic. High unemployment, closed businesses, travel reductions and more have ripped into otherwise healthy real estate portfolios, creating challenges for all building owners in meeting their payroll, utility, tax and debt service obligations. Overall industry low leverage, general market balance, and functioning capital markets are positive influences that – when coupled with growing good news regarding vaccines – results in an increased optimism on part of industry leaders,” said Real Estate Roundtable President and CEO Jeffrey DeBoer.
DeBoer added, “That optimism is dependent however on urgently-needed additional COVID relief from Washington and on the rapid testing and availability of effective vaccines. Federal lawmakers and regulators must support further assistance to bridge people and businesses into a post-COVID economy. Help is needed quickly for local governmental budgets, as well as for people and businesses negatively economically impacted by the pandemic. And some protection from unnecessary lawsuits must be provided to businesses to spur a more robust transition back to workplaces. ”
The Roundtable’s Q4 Economic Sentiment Index’s Topline Findings include:
- Increased Optimism
Respondents’ views reflected an increase in optimism for overall and near-term conditions (from a recent and sharp drop).
- Better General Market Conditions
A majority of respondents anticipated better market conditions in one year’s time, having noted worse market conditions today as compared with a year ago.
- Stable Capital Markets
Most respondents cited accessible capital markets for high-quality assets, and an increase in debt as well as equity availability.
Data for the Q4 survey was gathered by Chicago-based FPL Associates on The Roundtable’s behalf.
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Aims to Develop Business Continuity Insurance in Public/Private Program
WASHINGTON, D.C., Oct. 28, 2020—The newly formed Business Continuity Coalition (BCC) brings together more than two dozen industries and companies, which represent more than 50 million workers, to develop a plan with policymakers and other stakeholders to protect American jobs and to limit future economic damage from pandemics and other national emergencies that cause business interruptions.
Closures and shutdowns caused by COVID-19 have significantly impacted the employees and operations of businesses across the country, and the BCC, representing the restaurant, entertainment, hospitality, gaming, retail, communications, broadcasting and real estate industries, encourages policymakers to take urgent steps to prepare for future risks.
The BCC is advocating for a public/private business continuity insurance program that, in the event of a government-ordered shutdown, will enable employers to keep payrolls and supply chains intact, helping to limit job losses and furloughs, reducing stress on the financial system, and speeding economic recovery when government-imposed limitations on operations are lifted.
“Restaurants across the country were the first shutdown by the pandemic and will be the last to recover,” said Sean Kennedy, executive vice president of public affairs, National Restaurant Association. “Restaurants that have managed to survive are faced with an uncertain future and long-term challenges as pandemic threats continue to loom. A public/private backstop for business interruption insurance will help remove one of the unknowns in rebuilding and help small and large business owners plan for the future.”
Patrick Kilcur, executive vice president, Motion Picture Association, and Jean Prewitt, president & CEO, Independent Film & Television Alliance, agree with the BCC’s critical objective and its importance to their industry. Kilcur said, “The American film, television, and streaming industry is a strong contributor to the U.S. economy, supporting more than 2.5 million jobs in all 50 states. COVID-19 has caused enormous uncertainties and challenges for our industry. We look forward to working with the BCC on a public/private insurance solution which will be essential as we navigate returning to production.”
“Insurance policies are vital to ensuring our industry can return to production in a meaningful way, and the entertainment industry looks forward to working with the BCC and the other stakeholders on this important initiative,” Prewitt stated.
The effort to create a plan for a public/private business continuity insurance program is in its early stages. The plan must meet the needs of a broad range of groups: the businesses and employers directly impacted, insurers, lenders and other creditors, policymakers, and importantly, taxpayers.
Steven A. Wechsler, president and CEO of Nareit, said, “We believe it is better to plan and prepare now for the future economic risks associated with pandemic-related and other potential government shutdowns of the economy rather than just wait for the next time.”
The need for such a program is not in doubt, said Jeffrey D. DeBoer, president and CEO of The Real Estate Roundtable. “The devastating economic impact of this pandemic and the unprecedented government-mandated shutdown has dramatically demonstrated the need for readily available and affordable business continuity insurance,” he said.
According to the coalition, there are a number of successful models that can provide guidance in structuring a business continuity insurance program. Among them are the Terrorism Risk Insurance Program originally enacted following the 9/11 attacks and the War Damage Corporation developed during World War II.
Steering committee members of the BCC include American Resort Development Association, Building Owners and Managers Association, Fox Corporation, Independent Film & Television Alliance, International Council of Shopping Centers, Motion Picture Association, NAIOP – Commercial Real Estate Development Association, Nareit, National Association of Realtors, National Restaurant Association, Sony Pictures Entertainment, The Real Estate Roundtable, and ViacomCBS.
The full list of BCC members is available at www.businesscontinuitycoalition.com.
About the Business Continuity Coalition
The Business Continuity Coalition (BCC), made up of business insurance policyholders from numerous industries, was created to advocate for the development of a public/private business continuity insurance program. A business continuity insurance program would help businesses protect their employees’ jobs and limit future economic damage from pandemics and other national emergencies that cause business interruptions and closures. The BCC is made up of organizations from the restaurant, entertainment, hospitality, gaming, communications, and broadcasting industries, as well as the apartment, healthcare, industrial, office, and retail real estate sectors. www.businesscontinuitycoalition.com
Presumptive Democratic nominee Joe Biden on July 21, 2020 released a policy proposal to fund universal childcare and in-home elder care by taxing real estate investors and targeting the taxation of like-kind exchanges. Real Estate Roundtable President and CEO Jeffrey DeBoer responded by noting the many ways in which like-kind exchanges contribute to economic growth and create greater opportunity for entrepreneurs from under-represented demographic groups.
- “The long-standing like-kind exchange tax law has encouraged investment in affordable housing and other properties, generated state and local tax revenue, and spurred new jobs through labor-intensive property improvement. Exchanges reduce the need for outside financing, leading to less leverage and debt on U.S. real estate. As a result, exchanges allow cash-strapped minority, women, and veteran-owned businesses to grow their business by temporarily deferring tax on the reinvested proceeds,” DeBoer said.
- He added, “Like-kind exchanges are particularly important during economic downturns when access to capital is less certain. In short, like-kind exchanges create a more dynamic real estate marketplace, ensuring properties do not languish, permanently underutilized and under-invested. Congressional review of like-kind exchanges is reasonable and appropriate, and we will support sensible reforms, as The Roundtable has in the past, that preserve and maintain the provision’s broad-based economic benefits.”
A 2015 economic study commissioned by The Real Estate Roundtable and other national real estate organizations on the US commercial real estate market highlights the critical role that 1031 exchanges play in stabilizing rents, safeguarding property values and strengthening the economy. (“The Economic Impact of Repealing or Limiting Section 1031 Like-Kind Exchanges in Real Estate” by Professors David C. Ling and Milena Petrova)
Systemic racism and injustice is a pandemic that has plagued our nation for far too long.
The real estate industry must help to eliminate at its core this scourge in our society and economy.
Our industry must prioritize efforts to mitigate racism’s impact with nothing less than the ultimate goal to eradicate it.
We must be persistent with these efforts long after we recover from the coronavirus in the coming months.
The killings of George Floyd and Breonna Taylor reflect deep systemic racism and injustice in America. These crimes are horrific but they are not isolated incidents.
As leaders in the real estate industry, and as citizens of our great nation, of course we must condemn overt forms of racism. Insidious forms of discrimination embedded in our governmental and economic systems must be as loudly denounced.
The Real Estate Roundtable must work harder than ever to reform our institutions so they empower folks with equal opportunities to thrive at home, at work, at school, and to rise out of poverty. Vandalism is not the answer, and innocent business owners should not be collateral damage particularly as they are trying to re-hire their workers after being shuttered for weeks. “Certain conditions continue to exist in our society which must be condemned as vigorously as we condemn riots,” Dr. King preached – words that resonate profoundly during these turbulent times as they did in 1967. We should all pause and continually study his “The Other America” speech.
Without significant, measurable actions that make deliberate progress to halt abuse and inequality, our nation is destined to repeat again and again the failures of the past.
We must do our part to set the country on a new path. Black people, brown people, poor people, indigenous people, disabled people, LGBTQ people — the American people — must all be able to take it on faith that they are fully and equally protected under our laws and that hard work, education, and determination can take you where you want to go in life.
The moment for leadership is now. The Real Estate Roundtable commits to motivate meaningful and lasting change within our spheres of influence.
These are not hollow words. We consider it a moral and economic imperative for our industry and organization to take immediate and concrete actions that stand against racism and for inclusion.
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