Nathan VonGunten, Director
GRS | Title
(330) 267-4405
[email protected]
Commercial real estate could face increasing headwinds over the next year, according to a recent Real Estate Roundtable (RER) survey of executives.
Though the findings weren’t steeped in negativity, there was an increase in respondents saying that asset values could decrease, less capital will be available for financing and the industry’s general conditions will worsen.
For this year’s first quarter, the overall RER index came in at 54, with current conditions at 57 and sentiment at 51 for the coming year. Though higher than last year’s first quarter, it’s still significantly down from the same period in 2015.
Among the comments listed in the survey were: “People are cautiously optimistic but reserved. How long can the cycle run? We think the window of visibility is a lot shorter than it was. People seem to feel good about this year, but beyond that, I can’t say they know how to feel.” And: “Things are humming along nicely now, but heading into 2019, it gets foggier.”
Just under half of the respondents said that overall conditions will be “much worse” or “somewhat worse” in the coming year. On asset values, 44 percent had the same sentiment, which is better than the 50 percent who said that about their experience over the last 12 months. On equity lending, 19 percent see things getting worse, with 23 percent saying it about the debt situation.
However, RER President and CEO Jeffrey DeBoer expressed optimism about President Trump’s $1.5-trillion infrastructure plan and how it could potentially improve the overall economy.
Meanwhile, a recent Colliers International report says that the commercial real estate market likely peaked last year. It cites eight months in a row of declining values, leveled off cap rates, a larger gap between buyers and sellers and a flight toward risky assets, according to Bisnow.
“Slow and steady growth” is expected for offices. Multifamily could be hurt by slow wage growth but helped by continued problems in the home-ownership realm. Retail continues to lose investors after the thousands of store closings that have taken place over the last few years. Industrial is still considered a bright spot, due to increased construction fueled by e-commerce growth.
On a brighter note, the National Association of Realtors sees vacancy rates falling in four sectors through next year’s second quarter, due, in part to recent tax reform legislation and an expanding overall economy.
About GRS Group:
GRS Group is a leading provider of commercial real estate (“CRE”) services worldwide. With offices across the United States, Europe, and affiliates around the globe, GRS Group provides local market knowledge with a global perspective for institutional real estate investors, occupiers and lenders worldwide. The GRS Group team has evaluated and advised on over $1 trillion in CRE transactions.
Through the company’s proprietary management process, Global Services Connection, GRS Group delivers an integrated suite of services including Financial Advisory, Transaction Management, Assessment and Title Insurance. We provide a single point of contact, capable of leveraging the GRS Group portfolio of companies and delivering customized solutions to assist our clients in achieving their investment goals.