CRE market is ready and able to take on a slowdown

With increased talk of an economic slowdown in the coming years as the long period of expansion comes to an inevitable end, the commercial real estate market is well-placed to cope.

The Real Estate Roundtable 2019 Q1 Sentiment Index shows that CRE executives are confident that the industry will prove resilient as the US economy slows; but they are still concerned about the uncertainty of what’s to come.

"The unsettling year-end capital market turbulence caused a degree of early 2019 industry concern. However, as the first quarter moved forward, the equity markets strengthened and positive job creation continued to fuel steady economic growth.  These conditions bolstered the already well-balanced commercial real estate markets in Q1," said Roundtable CEO and President Jeffrey D. DeBoer.  "Looking ahead, our CRE executive survey reveals the timing of a natural economic cycle slowdown is concerning, but that is moderated by fundamentally sound commercial real estate markets," DeBoer added.

The survey of executives reveals that despite increased confidence in current conditions, there is a sense that a slowdown is incoming and respondents suggest they have diversified their investment focus and are placing capital into less traditional real estate property types.

Prices reaching peak
Prices, although still rising for some assets and in some markets, may have plateaued or are reaching peak; 46% of reported Q1 asset values today are "about the same" compared to this time last year, 40% believe that one year from now, values will be "about the same."

"Over the last decade, the commercial real estate industry has not overbuilt or over-leveraged, resulting in disciplined markets that could act as a resilient buffer to any potential slowdown in the U.S. economy.  Our Q1 survey shows industry executives have concerns over unpredictable influences on the economy, such as the recent government shutdown and uncertain outcome of ongoing international trade talks,” added DeBoer.  Policymakers need to focus on bipartisan pro-growth policies designed to encourage further investment, spur job creation and propel the economy forward for all."