CRE Executives Report 'Balanced and Stable' Conditions, Concern for Future

Michael Tucker mtucker@mba.org

August 15, 2018


Commercial real estate executives see "balanced and stable" market conditions despite growing concerns the market could be nearing the end of its current cycle, the Real Estate Roundtable reported.

The Roundtable's third quarter Economic Sentiment Index registered at 52, up one point increase from the second quarter. The current-conditions index score increased four points from the previous quarter to 56, up 5 points from a year ago.

"As we move into the second half of the year, we continue to see robust markets, with debt and equity available and asset values strong," said Roundtable CEO and President Jeffrey DeBoer. "The commercial real estate industry remains confident for the remainder of 2018."

The report said the positive snapshot of current commercial real estate markets reflects a general absorption of recent interest rate increases and overall economic stimulation from tax reform.

But looking ahead, there is growing sentiment the industry is nearing the end of its current cycle, the report said. The future conditions index score, 49, is seven points below the current conditions index. Most respondents suggested asset values have reached their peak for many property types, especially in major gateway cities.

Though debt and equity capital sources remain plentiful, respondents expressed some concern about the amount of debt available and the ramifications of the mounting time pressure some lenders have to invest their capital.

Survey respondents said they view property supply and demand metrics as balanced at the moment. Some cited "pockets" where the balance is slipping but felt general market conditions remain positive barring an unexpected event, the report said.

Nearly half--49 percent--of survey participants reported seeing asset prices as about the same as one year ago and 47 percent said they expect values to be nearly the same in another year, reflecting the view that primary markets will likely maintain peak pricing for many property types. But the industrial sector still has "room for growth" through 2019, the report said.

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