Investors Still Upbeat, More So Longer-Term

Investors have reason to be “cautiously optimistic” about the balance of 2016, DeBoer says.

WASHINGTON, DC—Despite the recent volatility in the global economy and an equal measure of uncertainty domestically over the presidential race, investors remain confident in the strength of US commercial real estate fundamentals, the Real Estate Roundtable said Friday. That being said, the latest quarterly Sentiment Index from the Roundtable is down slightly from the prior quarter. The second-quarter Overall Sentiment Index registered at 49, off a point from 50 in the Q1 index. The Current-Conditions Index is down three points to 51, while the Future-Conditions Index is now at 48, representing a three-point increase from the previous quarter. The Overall Index is scored on a scale of 1 to 100 by averaging the Current and Future indices, with any score over 50 viewed as positive. “Responses to our recent Sentiment Survey reveal continued stability in commercial real estate asset values and financing options,” says Jeffrey DeBoer, CEO and president of the Roundtable. “The volatility in many economic measurements, coupled with the ongoing Presidential election, are creating some uncertainty in real estate markets. However, supply and demand is in balance in most markets, and the strength of the US economy relative to the rest of the world give real estate leaders reason to continue to be cautiously optimistic about the coming year.” A majority of participants agreed that the availability of debt has tightened significantly over the past quarter, with many citing the regulatory environment’s more stringent due diligence standards. In particular, the Roundtable sees the overlapping regulations being imposed on lenders as potentially leading to some liquidity issues in some markets and modestly reducing reduce the availability of debt capital over the coming year while equity availability is expected to remain about the same. Another consensus among respondents was that asset valuations should remain steady. Seventy-one percent of survey respondents said they expect values to be “about the same” or “somewhat higher” a year from now. Data for the survey was gathered in April by Chicago-based FPL Associates on behalf of the Roundtable.