Commercial Real Estate Executives Optimistic Despite Serious Current Market Challenges

The Real Estate Roundtable President and CEO Jeffrey D. DeBoer

WASHINGTON — Commercial real estate executives expressed a modest increase in optimism about market conditions, according to The Real Estate Roundtable’s Q4 Economic Sentiment Index.

A majority of respondents to the annual survey also noted that general conditions one year from now will be either “somewhat better” or “much better” than today.

Those surveyed noted particularly challenging economic conditions in the hospitality and retail sectors; market uncertainty associated with future office space use; somewhat stable multifamily markets, and relatively stronger industrial and life science markets. They cited industry fundamentals, functioning capital markets, industry-wide low leverage and modest lender debt service forbearance as factors in the industry’s ability to thus far withstand the very serious COVID-related market challenges.

“Nearly every sector of the commercial real estate industry is facing serious economic challenges due to the overall impact of the pandemic. High unemployment, closed businesses, travel reductions and more have ripped into otherwise healthy real estate portfolios, creating challenges for all building owners in meeting their payroll, utility, tax and debt service obligations. Overall industry low leverage, general market balance, and functioning capital markets are positive influences that – when coupled with growing good news regarding vaccines – results in an increased optimism on part of industry leaders,” said Real Estate Roundtable President and CEO Jeffrey DeBoer.

DeBoer added, “That optimism is dependent however on urgently-needed additional COVID relief from Washington and on the rapid testing and availability of effective vaccines. Federal lawmakers and regulators must support further assistance to bridge people and businesses into a post-COVID economy. Help is needed quickly for local governmental budgets, as well as for people and businesses negatively economically impacted by the pandemic.  And some protection from unnecessary lawsuits must be provided to businesses to spur a more robust transition back to workplaces.”

The Roundtable’s Q4 Economic Sentiment Index’s Topline Findings include:

  • Increased Optimism
    Respondents’ views reflected an increase in optimism for overall and near-term conditions (from a recent and sharp drop).

  • Better General Market Conditions
    A majority of respondents anticipated better market conditions in one year’s time, having noted worse market conditions today as compared with a year ago.

  • Stable Capital Markets
    Most respondents cited accessible capital markets for high-quality assets, and an increase in debt as well as equity availability.

Data for the Q4 survey was gathered by Chicago-based FPL Associates on The Roundtable’s behalf.