CRE Executives’ Expectations Dim In Latest ‘Sentiment Index’

The Real Estate Roundtable's latest ‘Sentiment Index’ of commercial real estate executives slid for the second quarter in a row – hitting its lowest point since fall 2009. The lowered expectations reflect concerns about the sluggish economic recovery, Washington's ability to address fiscal and tax policy challenges, a host of new regulatory requirements, and the long-term European debt situation.

The survey, prepared by FPL Associates, is based on data colleced Oct. 3-12 in advance of Thursday's news that European leaders have reached a deal on the euro-zone debt crisis.

After rising slightly at the beginning of the year and remaining at 77 (out of 100) points in the second quarter, the overall Index tumbled to 69 in the third quarter and to 59 in the latest survey. The drop indicates a material shift in perceptions on current and future market conditions, property valuations, and access to debt and equity capital, the Real Estate Roundtable says.

‘For the first time in two years, a significant portion of respondents see conditions as worse than a year ago and predict a decline in the coming year,’ according to the report.

‘For much of the past year, we have been concerned about the uneven, or 'bifurcated,' nature of the commercial real estate recovery – and have focused on policy ideas to foster job growth and broaden this recovery beyond the urban 'gateway' markets,’ says Roundtable President and CEO Jeffrey D. DeBoer.

‘Now, amid tremendous uncertainty on an array of federal policy issues – from deficit-cutting and tax reform, to Dodd-Frank regulations, and potential housing market fixes – expectations are being dialed back considerably, and commercial real estate fundamentals are again under pressure, even in areas that had recovered significantly in terms of property values, pricing and access to credit and capital," he adds.

The percentage of survey respondents who said debt availability is ‘much better’ today versus one year ago shrank from 36% in the third quarter to only 6% in the latest survey. There was a corresponding spike – from 2% in the third quarter to 26% in the fourth quarter – in the percentage of respondents who said debt availability today is ‘somewhat worse’ than it was one year ago. Looking ahead, more respondents in the fourth-quarter survey said they expect debt availability to be about the same or somewhat worse next fall.

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