Commercial Real Estate Executives Express Optimism About Current and Future Market Conditions
“During the pandemic, property owners, managers, investors and lenders have focused on mitigating the impact of the crisis on their residential and commercial tenants,” said the President and CEO of the Real Estate Roundtable Jeffrey D. DeBoer. “The industry has restructured leases with stressful tenants, advocated leasing and other federal assistance, educating tenants about access to relief supplies, making major reforms to operational operating protocols for health-related buildings, and issuing detailed guidelines to keep them safe and secure Effective ways to ensure the recovery of buildings. “DeBoer added,” Our Q1 index shows that despite the extremely challenging past 12 months, industry leaders are optimistic that conditions will turn out positively. General balance between supply and demand, working Capital markets and low leverage combined with increased vaccination efforts sparked the surge in optimism. Of course, all of this threatens to be reversed if vaccination grinds altogether or if national industry policy makers fail impose new tax or regulatory burdens. ”
The Roundtable’s Q1 2021 Sentiment Index recorded a value of 59 – an increase of fifteen points compared to the previous quarter. [The Overall Index is scored on a scale of 1 to 100 by averaging Current and Future Indices; any score over 50 is viewed as positive.]. This quarter’s Current Conditions Index of 44 rose by 17 points compared to the previous quarter, while the Future Conditions Index of this quarter rose by 13 points from 74 compared to the previous quarter. The last time the Future Conditions Index registered at 74 was over a decade ago in the third quarter of 2010.
The main findings of the report include:
- The Qt 2021 Real Estate Roundtable Sentiment Index recorded a value of 59, an increase of 15 points compared to the fourth quarter of 2020. Respondents continued to be optimistic about future conditions. However, the outlook depends heavily on the asset class and portfolio mix.
- The industrial and multi-family sectors have been identified as most resilient to the global pandemic and best positioned to perform successfully in a post-pandemic environment. The retail and hospitality industries continue to face challenges arising from public health policies and government restrictions.
- The low volume of transactions last year resulted in limited insight into the valuation of assets. Among the deals made, industrial assets have increased in value, reflecting the market as a whole, while apartment buildings are trading at a slight discount to their pre-COVID values.
- The capital flows in the real estate market follow the industry-specific effects of the pandemic. Most respondents cited accessible capital markets for high quality assets, especially in the industrial and multi-family sectors. In the case of unfavorable property types and strategies with leasing and / or development risk, however, it is more difficult to secure institutional equity and financing.
DeBoer noted, “The Roundtable continues to seek to work with the administration and Congress to advance bipartisan federal action that will accelerate economic recovery and strengthen our resilience to future pandemics or similar threats: direct assistance to workers and families, rental support for both Temporary tax incentives for both private and commercial tenants to offset the cost of critical health and safety measures by employers, as well as statutory liability guarantees for companies that clearly define expectations and provide employers with much-needed security to make it easier for them to return to work. ”
Data for the Q1 survey was collected by Chicago-based FPL Associates on behalf of The Roundtable. The full Q1 report can be found here.
SOURCE Real Estate Roundtable