CHICAGO-There are now even more questions than answers following a great first half and then the abrupt all-stop that the markets have experienced since mid-summer, according to the 2011 DLA Piper State of the Market Survey released this morning. What’s known is that deals have again slowed down, and there’s not much “optimism” left to go with the “cautious.”
The locally based firm distributed an email survey in September to real estate executives, with 280 respondents. Of these, about 70% describe themselves as “bearish” on the state of the commercial markets, up from 60% of respondents to the company’s similar survey last year.
Jay Epstien, co-chairman of the company’s Global Real Estate Group, tells GlobeSt.com that he thinks the survey responses would likely have been different if the questions were sent toward the end of the second quarter. “We were feeling pretty positive, especially in New York City and Washington , DC and some other strong gateway cities,” he says.
The respondents showed the uncertainty that has hit the US economy, Epstien says. As one respondent put it, “Until prices get to a point where upside outweighs uncertainty, capital will stay on the sidelines.” Epstien says he can’t help but agree, especially with the stock market Monday dropping to a 13-month low.
“When you’ve got very slow job growth, and financial markets up and down without finding new stability, people get concerned about how to make investment decisions,” Epstien says. “I think you’re going to see more caution on buying, selling and making lease decisions for the rest of the year.”
Even the CMBS markets have cooled. Where there were about $20 billion in CMBS loans completed by the second quarter and there were thoughts the year could hit $50 billion, now respondents almost unanimously agreed that there will be less than $40 billion in CMBS for the year.
Concern about foreign markets entered the fear picture for many investors, mostly about Greece’s debt crisis. However, with the problems Europe is having, respondents were also concerned that there will be a drop by overseas investment into the United States. “If their markets continue to be unstable, what does that mean, for example, for German investors that continue to like parking their money here?” Epstien says.
About 53% of respondents thought that the second half would see derailment of deals. “Q3 and Q4 will not be pretty and 2012 will be worse,” said one person as a survey response.
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