CRE executives optimistic but there are concerns

Commercial real estate executives remain confident in the market as 2018 nears its end.

Despite a slight decrease of 2 points, the Real Estate Roundtable’s Sentiment Index for the fourth quarter registered 50, on the borderline for the 100-point scale, reflecting some concerns heading into 2019.

"Our latest Sentiment Index finds commercial real estate industry leaders experiencing continued positive market conditions and cautiously predicting solid performance into 2019. Concerns exist about interest rate and construction cost increases, as well as labor shortages. However, these concerns have not yet caused significant market disruption," said Roundtable President and CEO Jeffrey DeBoer.

The index’s components show mixed sentiment with current conditions down 3 points to 53, while future conditions weakened to 47, down 2 points. The overall index is the average of the two components.

"With some exceptions, supply and demand in major markets remains essentially in balance, and access to debt and equity remains strong. Disciplined, not aggressive, development and investment are the current watchwords of smart real estate executives," DeBoer added.

Concern over values, costs
Ninety percent of survey participants report Q4 2018 asset values today are "about the same" or "somewhat higher" compared to this time last year.

Looking ahead, a minority of participants said they expect values to be "somewhat lower" one year from now with 55% of respondents seeing no significant value declines.

"After the midterm elections we look forward to continuing to work on positive, pro-growth national public policy,” added DeBoer. “The nation needs policy action to address the growing labor shortage and infrastructure needs. The terrorism risk insurance act will also need to be extended in the new Congress.

He concluded that the Real Estate Roundtable intends to try to help policymakers tackle these and others issues by “offering smart research and positive bipartisan advocacy that emphasizes commercial real estate's contributions to job creation, communities, and retirement savings."