Published on February 27, 2014
IN ASSOCIATION WITH: MIDDLE MARKET COMMERCIAL REAL ESTATE OUTLOOK: IN A MIXED MARKET, OPPORTUNISM PREVAILS The worst may be over for the U.S. commercial real estate industry. In fact, well over half of industry participants – including developers, investors, lawyers and financiers – are now signaling that markets are entering a period of recovery. Cautious recovery is evident, with three out of five executives describing their outlook as opportunistic – and just over one in 10 additional executives saying their behavior will be aggressive, since they see conditions as ripe for long-term investments. Seeking to gauge conditions and outlooks for the industry, Forbes Insights, in association with CIT (NYSE: CIT), a leading financial services company serving the real estate community, conducted an October 2013 survey of industry participants. Interpreting responses from 208 senior, U.S.-based middle market commercial real estate executives, the survey reveals that: • ommercial real estate is in cautious recovery C • arkets are mixed, but feature both aggression and M opportunism • rends in interest rates and unemployment top industry T concerns • axation and regulation are hindering performance T • hough government budgets may be tight, investors T want tax credit and incentives concessions • inancing ranges from overabundant to spotty F 1 | DECEMBER 2013
IN ASSOCIATION WITH: COMMERCIAL REAL ESTATE OUTLOOK: IN A MIXED MARKET, OPPORTUNISM PREVAILS COMMERCIAL REAL ESTATE IS IN CAUTIOUS RECOVERY • ver half of industry executives, 57%, believe that the U.S. commercial real estate market O is in recovery • ne in 10 – part of this 57% – say the recovery is very strong O • ust under a third, nonetheless, warn that certain segments of the industry are poised for J significant decline MARKETS ARE MIXED, BUT FEATURE BOTH AGGRESSION AND OPPORTUNISM • ore than half (51%) of industry executives view markets as mixed M • ut a third describe the markets where they are active as strong – 6% saying “very strong” B • verall, three out of five (60%) say their go-forward orientation is opportunistic, a mix of O challenges and opportunities • 2% describe their market orientation for the coming year as aggressive, saying today’s 1 conditions are making for great long-term investments INTEREST RATES AND UNEMPLOYMENT TOP THE LISTS OF INVESTMENT CONCERNS I n order of the average ranking by executives’ lists of the top five investment drivers, the top investment influences include: • • • • • 2 | DECEMBER 2013 Interest rates Unemployment rates The Affordable Care Act Foreclosures Consumer confidence
IN ASSOCIATION WITH: COMMERCIAL REAL ESTATE OUTLOOK: IN A MIXED MARKET, OPPORTUNISM PREVAILS TAXES, REGULATIONS AND SOME COSTS ARE IMPEDING GROWTH POTENTIAL • hree out of five say the current tax and regulatory climate is placing a strain on their T performance; just under 60% are concerned by the ACA, with nearly half (46%) saying its implementation will depress the economy • 0% cite concerns over the impact of Dodd-Frank on investing and lending 4 • 2% are concerned by trends in the availability/cost of terrorism insurance; 23% say the 2 high cost of terrorism insurance will likely stall certain segments DESPITE GOVERNMENT AUSTERITY, INVESTORS WANT TAX CREDITS AND INCENTIVES • 0% say they are negotiating harder with state and local governments to obtain tax cred4 its, cash grants and related business incentives • nly 22% believe such packages are growing larger O • 8% say the availability of tax credits and cash grants for green energy are a significant 2 influence on their design, renovation and related commercial real estate investments • 2% say the availability of tax-exempt financing has played a significant role in past invest2 ments; 27% say it will likely play a significant role in the future FINANCING RANGES FROM OVERABUNDANT TO QUESTIONABLE • hree out of five, 61%, say they have adequate capital for their operations – T with 12% of these indicating that capital is overabundant for the opportunities available • 3% say capital availability is spotty: though they could raise what’s needed for the 3 most profitable projects, anything less than ideal might be very challenging • % say their access to capital is questionable or has completely dried up 6 • alf (51%) are likely to pursue bank financing in the next 12 months – H 18% of these saying very likely 3 | DECEMBER 2013
ABOUT CIT ABOUT FORBES INSIGHTS Forbes Insights is the strategic research and thought leadership practice of Forbes Media, publisher of Forbes magazine and Forbes.com, whose combined media properties reach nearly 50 million business decision makers worldwide on a monthly basis. Taking advantage of a proprietary database of senior-level executives in the Forbes community, Forbes Insights conducts research on a host of topics of interest to C-level executives, senior marketing professionals, small business owners and those who aspire to positions of leadership, as well as providing deep insights into issues and trends surrounding wealth creation and wealth management. Bruce Rogers CHIEF INSIGHTS OFFICER Brenna Sniderman SENIOR DIRECTOR Hugo Moreno EDITORIAL DIRECTOR Brian McLeod MANAGER, NORTH AMERICA Lawrence Bowden MANAGER, EMEA Founded in 1908, CIT (NYSE: CIT) is a financial holding company with more than $35 billion in financing and leasing assets. It provides financing, leasing and advisory services to its clients and their customers across more than 30 industries. CIT maintains leadership positions in middle market lending, factoring, retail finance, aerospace, equipment and rail leasing, and vendor finance. CIT operates CIT Bank (Member FDIC), its primary bank subsidiary, which, through its Internet bank BankOnCIT. com, offers a suite of savings options designed to help customers achieve a range of financial goals. www.cit.com/perspectives To subscribe to the CIT Perspectives Newsletter, please send an email to firstname.lastname@example.org. CIT PRESS INQUIRIES Curt Ritter Director of Corporate Communications email@example.com Matt Klein Vice President, Media Relations firstname.lastname@example.org CIT BUSINESS INQUIRIES Dan Infanti Senior Vice President, Marketing and Advertising email@example.com David Fields Assistant Vice President, Marketing firstname.lastname@example.org Curtis Bergh DEPUTY DIRECTOR, APAC William Millar REPORT AUTHOR Kevin Adkins ART DIRECTOR IN ASSOCIATION WITH: 60 Fifth Avenue, New York, NY 10011 | 212.366.8890 | www.forbes.com/forbesinsights
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