Financing and equity remain strong for commercial sector
A panel of real estate industry leaders are confident that the CRE market will be balanced in the second quarter of 2018.
The Real Estate Roundtable reveals optimism despite the rising cost of construction and an uncertain outlook for markets in 2019.
"Real estate fundamentals continue to remain strong into 2018, where balance between supply and demand in almost every sector is healthy, while debt and equity for real estate as an asset class remains abundant," said Roundtable President and CEO Jeffrey DeBoer. "There are fears about political uncertainty, trade wars, and interest rate increases, which are having some impact and creating a manageable amount of uncertainty for the markets for the remainder of 2018 and looking ahead to 2019.”
The report's Topline Findings include:
- The Q2 index came in at 51, a 3 point drop from Q1. Awareness of the length of current cycle and trepidation about economic conditions in 2019 has led to a general feeling of cautiousness. That said, availability of affordable financing and plentiful equity for the best quality investments are driving continued investment activity.
- Despite rising costs of construction, development continues somewhat unabated. Some responders pointed to the expectations of the millennial generation as the driver for reimagined building uses and new developments.
- Asset values are perceived as peaking for the most property types and markets. Industrial and multifamily assets are viewed as classes with room to continue pricing growth, whereas many felt retail assets are overpriced and possibly overbought.
- Responders noted the absence of previously ubiquitous Asian capital this quarter. Despite this absence, all responders felt debt and equity was readily available for quality investments.
Peak pricing appears to have stayed stable over the past year and the Roundtable experts are fairly confident that will continue into 2019.
"As our Q2 Index show, with debt and equity readily available for quality investments and new development opportunities arise, industry leaders are being forced to reevaluate, innovate, and reimagine their buildings — driven by an influx of the millennial generation and their new set of expectations for office and multifamily markets. It is vital for our industry to continue developing new technology solutions for the ever evolving demands of the market," added DeBoer.
