As found by the
"2016 Commercial Real Estate Outlook," released by CIT, many commercial real estate executives see solid prospects for their sector, with 52% indicating that they believe that their segment of the market is either strong or very strong, and 71% say adequate capital is available for investment.
The study found that 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. Further, when considering the adoption of new technology, most believe that the influx of commercial real estate tech companies is revolutionizing the industry.
Other key findings from the study include:
Recovery Seen While Challenges Remain: Although commercial real estate executives have a mostly positive view of the market, they recognize that, while the U.S. commercial real estate market is recovering (47% agreeing), there are still certain segments that are poised for significant decline (44% agreeing).
Mixed Market Conditions Lead to Opportunistic Posture: Just over 60% of executives surveyed characterize their current market posture as 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.
Rise of CRE Technology Seen as Having Impact: The benefits of commercial real estate technology are clear, with most executives agreeing that these advancements are revolutionizing the industry (55% agreeing). Despite this, many are slow to adoption, with only 11% of respondents rating themselves as "leading edge" when it comes to implementation.
Liquidity Available for Solid Opportunities: The majority of companies, 71%, say adequate capital is available for investment. One in four, 24%, say capital is available for "the right" deals only. When asked about financing, slightly over half of respondents say that they are lengthening the duration of their financing in an effort to lock in today's relatively low rates over a longer period of time.
Local and State Incentives Have Influence: Incentives continue to be offered by state and local governments in the form of tax credits, cash grants and related business incentives. Thirty-four percent of surveyed executives agree that green tax credits and cash grants are having a significant influence over their design/renovation and related commercial real estate investment choices.
Demographic Shifts Drive Market Changes: Executives are split on the commercial real estate impact of baby boomers downsizing their lives, citing both the positive (33% emphasizing) and negative (26% emphasizing) effects on their investments. The emergence of rules mandating that low-income housing be integrated with affluent housing also delivers mixed results. Overall, those who see changing demographics as a top five driver tend to target properties with relevance to middle-income consumers.
In sum, commercial real estate executives have solid outlooks for their market segments and see technology and demographics, among other factors, as key drivers of change in the sector.
Complimentary copies of the CIT Commercial Real Estate Outlook can be downloaded at
CIT commissioned Forbes Insights to conduct online research between February 12 and March 14. Forbes Insights surveyed 201 senior executives from commercial real estate management companies, brokers, investors, financing executives and attorneys.
Matt Galligan is President of
CIT Real Estate Finance. His group provides stabilized, value-add and construction loans between $20 million and $50 million to highly experienced and well-capitalized developers in the office, retail, industrial and multi family rental sectors.
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