Real Estate Market to Worsen, Survey of Real Estate CEOs Concludes
Senior real estate executives believe that the troubled U.S. financial markets and the broad economic downturn have paralyzed the real estate sector, according to The Real Estate Roundtable Sentiment Survey for fourth quarter 2008.
Senior real estate executives believe that the troubled U.S. financial markets and the broad economic downturn have paralyzed the real estate sector, according to The Real Estate Roundtable Sentiment Survey for fourth quarter 2008.
The survey of more than 100 senior executives encompassing office buildings, shopping malls, warehouses, hotels, and apartment buildings shows confidence in the real estate market has deteriorated below last quarter's depressed levels.
"Real estate is now experiencing a seismic liquidity shock. Even though loan delinquencies in the sector are very low, the ongoing lack of credit and drop in asset values has paralyzed the market," says Jeffrey D. DeBoer, Roundtable president and CEO. "It is now clear that unless bold policy actions are taken to specifically assist commercial real estate markets, this problem will intensify to mammoth proportions."
Ninety percent of respondents believe conditions are worse, and over half stated that conditions are "much worse" than 12 months ago (up from 74 percent and 28 percent, respectively, in July). Of all respondents, 39 percent expect real estate market conditions to get worse in 2009, up from 24 percent in the previous quarter.
Respondents also reported that asset prices are continuing to drop, a trend they expect to persist over the coming year. Sixty-eight percent of those surveyed said commercial real estate values will be lower next year, while 27 percent believe they will be "much lower" (up from 49 percent and 5 percent, respectively, from the third quarter).
Nearly all the executives surveyed said access to capital has significantly decreased as debt and equity markets have tightened. Notably, 84 percent said credit availability is "much worse" than it was one year ago. Equity financing conditions are worse as well, but not to the extent seen on the debt side -- 51 percent characterized equity financing as "somewhat worse" than one year ago; only 23 percent said conditions are "much worse."
Although there is mild optimism that capital market conditions will improve in 2009, approximately a quarter of those surveyed expect conditions to worsen.
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