Inflation, Labor Shortages Cloud CRE Execs' Outlook
Increased vaccination and moves to reopen businesses, though, are fueling a positive view of the current environment.
Commercial real estate executives looking at the future are worried about labor shortages, inflationary pressures, and the outcome of current policy proposals in Washington.
A comparatively greater worry for the future than the optimism for the current environment came out in a second quarter poll of the leaders by The Real Estate Roundtable.
For the second quarter, the Current Sentiment Index was 78, a 34-point increase over the first quarter reflecting increased vaccination, a reduction in the number of positive COVID tests, and moves to reopen businesses.
However, the Future Index score of 75 was only one point above. The Roundtable attributed the dramatically lower upswing in part to the pandemic’s long-term impacts.
“As the long-term economic repercussions of the pandemic remain unclear, Washington lawmakers should prioritize new policies that encourage continued economic growth over initiatives that could hinder the recovery,” Roundtable President and CEO Jeffrey DeBoer said in prepared remarks.
Inflation concerns are being increasingly voiced by top figures in the industry.
Lately, Ryan Severino, chief economist at JLL said inflation is likely to remain above levels CRE businesses are accustomed to with demand for many building materials outstripping supply.
Last month, John Hofmann, commercial production team leader for KeyBank said there have been a lot of inflationary concerns in the headlines which he noted could bode well for some in this sector since real estate has been an incredible inflation hedge that appeals to equity investors.
A recent analysis from S&P Global Market Intelligence notes that rising inflation could upset the bond and equity markets and negatively impact consumer spending.
In early May, Marina Vaamonde, an investor and founder of PropertyCashin.com told GlobeSt.com increased inflation is expected by many economists.
A year ago, the Roundtable’s sentiment hit an 11-year low of 13.
Over four-fifths of the executives (83%) in the current report said general market conditions are “much better or somewhat better” than at the nadir and the availability of capital is better.
The scale goes from 1 to 100 with 100 being the highest confidence possible.