CIT: ‘Mixed’ CRE Optimism
Many commercial real estate executives still see solid prospects for their sector, CIT Real Estate Finance reported. But nearly half agreed that certain segments are poised for significant decline.
CIT Real Estate Finance President Matt Galligan said 52 percent of the 201 senior commercial real estate executives surveyed called their segment of the market either strong or very strong. “Commercial real estate executives appear relatively optimistic about the general state of the market in 2016, with many predicting higher than average deal volumes for their firms,” he said.
But despite their mostly positive view of the market, 44 percent of executives surveyed agreed that some segments could decline in the near future, CIT’s report said. Just over 60 percent of executives called their current market posture opportunistic, describing today’s market conditions as a “mixed bag” offering both challenges and opportunities.
“When reflecting on the economy, they see interest rates, consumer confidence, U.S. tax rates, unemployment and the global economy, respectively, as the top five factors driving commercial real estate investment,” CIT said.
A majority of companies–71 percent–said they find adequate investment capital. But one in four said capital is available for “the right” deals only. When asked about financing, slightly over half of respondents reported lengthening their financing duration to lock in today’s relatively low rates over a longer period of time. “Local and state incentives have influence,” CIT said.
State and local governments continue to offer incentives including tax credits, cash grants and related business incentives, and one-third of surveyed executives agreed that green tax credits and cash grants hold “significant influence” over their design/renovation and commercial real estate investment choices. Executives split on the commercial real estate impact of baby boomers downsizing their lives, citing both the positive (33 percent emphasizing) and negative (26 percent emphasizing) effects on their investments. “The emergence of rules mandating that low-income housing be integrated with affluent housing also delivers mixed results,” CIT said. “Overall, those who see changing demographics as a top-five driver tend to target properties with relevance to middle-income consumers.” Galligan said when considering the adoption of new technology, most executives–55 percent-“believe that the influx of commercial real estate tech companies is revolutionizing the industry.” But despite this, only 11 percent of respondents called themselves “leading edge” regarding implementation, he said.
