The Real Estate Roundtable, fresh off its 2011 State of the Industry Meeting last week, says its 1st Quarter 2011 Real Estate Roundtable Sentiment Index shows the most positive results since the survey of senior commercial real estate (CRE) executives began in 2008.
While ‘certainly not out of the economic danger zone,’ some commercial sectors are on the mend, explains Roundtable Chairman Daniel D. Neidich. The ability of the industry to bounce back hinges largely on job creation, he says.
‘Commercial real estate markets tend to recover from the top down, when higher-quality markets attract new capital and eventually other markets are affected,’ Neidich says. ‘But legitimate headwinds remain, such as an unacceptable unemployment level, a huge pipeline of maturing commercial mortgages and large fiscal issues at the state and local levels of government. There may be an uptick in tone expressed in our [first-quarter] Sentiment Index, but it is tempered by the ongoing economic risk of unemployment.’
The Sentiment Index, which is measured on a scale of one to 100, registered a score of 77 in the first quarter – up three points from the fourth quarter of 2010. The increase indicates that survey respondents see the CRE industry on a more favorable slope and expect slightly improved market conditions in the coming year, the Roundtable explains. The overall score of the Sentiment Index is based on the average of both current and future indices, which both registered 77.
According to the survey results, equity is seen as broadly available, debt is rebuilding from a very low base and transactions have begun to pick up. Values are also expected to trend modestly upward, but many respondents expect relatively restrained price movement until fundamentals return and net operating incomes improve, the Roundtable says.
Among the survey respondents, there is even some optimism that the commercial mortgage-backed securities (CMBS) market will start the long process of rebuilding this year. One interviewee commented, ‘I see CMBS coming back this year. Not to its peak, but I expect $45 billion to $50 billion in 2011. It will be a little like CMBS was in 2005.’
More than 100 executives from the CRE sector – encompassing office buildings, shopping malls, warehouses, hotels and apartment buildings – responded to the latest sentiment survey.Â
The entire index can be accessed here.
SOURCE: Real Estate Roundtable
