CRE Executives Bullish as Tax Reform Measures Take Shape
Commercial real estate executives show optimism about the country’s economic strength and expect real estate market activity to grow despite the aging economic cycle, reported law firm Akerman LLP, Miami.
Akerman’s annual U.S. Real Estate Sector Report surveyed more than 200 senior executives. They said developments including the December 2017 tax reform law and evolving technology have spurred economic and real estate market growth, though respondents did express concern about the likelihood of a coming market correction.
Coming off an optimistic outlook a year ago when 68 percent of respondents expressed more optimism for the market compared to 2017, a surprising percentage of executives expressed even more optimism this year–70 percent called themselves more bullish about 2019 market activity than 2018. Nearly half (46 percent) cited the U.S. economy’s continued improvement as the primary driver for increased confidence.
But the survey also showed some sentiments of softening. Nearly one-third of respondents cited interest rate uncertainty as their primary concern, followed by uncertainty in global economic conditions (23 percent) and uncertainty about federal government policy (22 percent).
“While the U.S. real estate market has remained resilient since the economic downturn, the headwinds we expected coming into 2019 are starting to come to fruition,” said Eric Rapkin, who chairs Akerman’s national Real Estate Practice Group. “Nonetheless, capital is still chasing deals, especially in gateway markets, and we’re beginning to see executives capitalize on tax advantages and deferral strategies such as Opportunity Zones.”
Other trends identified in Akerman’s 2019 survey included:
–Private equity funds and banks lead among various funding vehicles. Real estate executives said they expect most funding this year to come from private equity funds and institutional lenders. Asked about the top three areas they expect to fund the most commercial real estate debt and equity in 2019, 53 percent said private equity and 51 percent said banks. Additional funding sources selected by respondents include foreign investors (45 percent), insurance companies (28 percent) and real estate investment trusts (24 percent).
–Housing still dominates. Survey respondents expressed confidence in the multifamily sector, with 67 percent placing it among the top two sectors they expect to be most active this year, followed by single-family residential (50 percent). These results echoed last year’s survey, in which 63 percent of respondents predicted the multifamily sector would be the first or second most active in 2018. Within multifamily, 2019 respondents rank apartment development as likely to be most active this year, followed by senior living facility development.
