Akerman: CRE Optimism Rises

Commercial real estate lenders and investors have grown more confident since November’s presidential election, reported law firm Akerman LLP, Miami.

The annual Akerman U.S. Real Estate Sector Report said 53 percent of investors and lenders expressed more optimism about the U.S. commercial real estate outlook, compared to only 38 percent who expressed more optimism one year ago.

“As 2017 unfolds, industry executives are increasingly optimistic about the state of the U.S. commercial real estate market,” said Akerman Real Estate Practice Group Chair Richard Bezold.

Bezold noted that some “headwinds” including rising interest rates and potential unintended consequences of public policy changes face the CRE market. “But as we move into a deregulated environment, we expect less restrained capital to pursue opportunities actively and aggressively,” he said. “Local market knowledge and innovative investment strategies will continue to be the key differentiator for successful real estate investors.”

Potential de-regulation, tax reductions and stronger economic growth led to renewed investor confidence, Akerman said. Nearly 65 percent of real estate executives interviewed said the Trump administration’s agenda will have a “moderately or significantly positive” effect on the industry. This is up from 54 percent who were bullish about the pro-business presidential candidate during the 2016 campaign.

For the first time since 2010, commercial real estate leaders predicted single-family homebuilding will outpace multifamily development. Both investors and lenders said they anticipate an upswing in housing development across suburban markets, the report said. Investor attention will focus on replicating the “urban experience” in smaller communities with access to public transportation. More than 60 percent agreed the preference for live-work-play lifestyles in a compact city center ranks among the top three trends affecting U.S. real estate.

Investors have a “bullish” outlook for banks, Akerman noted. “As the Trump administration plans to reduce regulation on the financial services sector to allow for greater capital formation, real estate executives predict banks will be the main source for commercial real estate debt and equity in 2017,” the report said. Foreign investors and private equity ranked second and third, followed by real estate investment trusts, insurance companies and pension funds as the most likely real estate capital sources this year.

Akerman noted stability, transparency and “robust” U.S. real estate market fundamentals continue to attract international capital to the sector. Despite a strengthening U.S. dollar, 42 percent of real estate executives said they believe foreign investors will lead debt and equity finacing this year. They expect China will remain the dominant source of foreign capital. “To a lesser extent, investment is also expected to come from Europe and Latin America, and even less so from the Middle East and Canada,” the report said.

Commercial real estate leaders ranked technology among the three most significant factors affecting real estate development, Akerman said. “This trend, coupled with changes in consumer behavior, has brought about the era of ‘one-click shopping’ for millions of retail customers and led to a corresponding explosion in demand for more warehouses or fulfillment centers,” the report said.