Survey Shows Confidence for Markets in 2007

Company officials say that of the 274 executives that responded, almost 80% said that their outlook for the commercial real estate industry is "bullish," up from 43% of respondents in the company's previous survey in 2005. Also in the 2007 survey, most of the executives believe that the high-stakes, public-to-private mergers and acquisitions trend will continue in the coming year; and that the hot product market right now is multifamily property, followed closely by downtown office space.

Even Jay Epstien, co-chairman of the Global Real Estate Practice at the law firm, tells GlobeSt.com that he was surprised by the confidence the executives share about the coming months. "I would have thought the response would be a bit more balanced," he says. "You would think that people are looking at the velocity of the transactions today, and the continued rise on pricings on deals, that that would suggest some skittishness, or at best they would be cautiously optimistic. That's not their view, people are very optimistic, we're coming off the most active period in the history of the market."

He says he wasn't surprised, however, that nine out of 10 respondents said they expect more large buyouts of public companies by private firms. "There continues to be an enormous supply of capital in private funds. These entities find themselves in the position that they have to do larger and larger deals to get capital deployed. You don't make returns for investors by having capital sit," Epstien says. Most of the survey respondents said factors driving the big deals are private equity funds willing to pay a premium, cheap rates in the debt market and public markets undervaluing REITs. However, almost half the respondents said small- to medium-sized firms will have no trouble finding good properties, regardless of the larger deals going on.

Everyone knows that multifamily has been riding high among investors for a few years now, so though a quarter of the respondents said it's the most attractive opportunity for investors, downtown office space also was heavily favored. The downtown office market continues to experience its strongest resurgence since 2001, and is approaching a full recovery, said DLA officials. In the 2005 survey, only 9% of respondents marked downtown office as a good opportunity, which increased to 22.6% in the 2007 survey. "You're going to see an uptick in downtown office rents this year," Epstien says.

The survey was released in conjunction with the company's Global Real Estate Summit 2007. The event is being held at the Four Seasons Hotel on May 1.