CRE Executives Cite Economic Cycle as Top Concern

Image courtesy of Seyfarth

Shuttered and restaurants and well-meant extension of tenant and borrower protections rank as real estate executives’ top concerns, reported law firm Seyfarth, Chicago.

The recession ranked third on the list of concerns, Seyfarth’s annual Real Estate Market Sentiment Survey reported.

But after a challenging 12 months, CRE executives are surprisingly optimistic about their own operations moving forward. A full 85 percent of respondents called 2021 “a year of opportunity” rather than retrenchment for their company.

“While this may just be a reflection of self-confidence, low interest rates and governmental stimulus provide a positive forecast for entrepreneurs in a fragile market,” the survey said, noting CRE traditionally follows its fundamentals and a key fundamental is interest rates. As rates stay low, optimism stays high, Seyfarth said.

“Market participants seem resilient; battered but not defeated,” said Seyfarth Partner and Real Estate Department Chair Paul Mattingly. “While cognizant of near-term challenges, the prevailing mood is one of optimism about long-term opportunities.”

Last Wednesday Federal Reserve Chairman Jerome Powell told Congress the Fed would be in “no hurry” to raise interest rates. Most Seyfarth survey respondents said they believe the Fed will not raise (or decrease) interest rates at all this year.

“As the world continues to battle the pandemic and climb out of a recession, there may be broad consensus in the industry that rates can’t go any lower and the chances of meaningful near-term inflation are slim,” the report said. “CRE executives could also be expressing general optimism for 2021 and confidence in the new Treasury Secretary Janet Yellen, a former chair of the Federal Reserve.”

Seyfarth reported most respondents think any potential tax reform in 2021 will have “minimal to no impact” on commercial real estate. “A 50-50 split in the United States Senate could have dampened any chance of significant reform,” the report said. “Also, given the current legislative priorities of the new Administration, a tax bill may not reach Congress until the third quarter, with a low probability of retroactivity for any adopted legislation.”