WASHINGTON, DC-Commercial real estate executives appear to be experiencing some variant of post-traumatic stress syndrome, or possibly a case of Groundhog Day fever, judging from the findings of the latest Real Estate Roundtable first quarter 2012 Economic Sentiment Survey. The year is shaping up as best as can be expected—yet many of the executives are still flashing back to 2011 with its disappointing drop after the optimism of the beginning of the year.
“Last year at this time people thought we had turned the corner on the recession and that growth was around the corner,” Jeffrey DeBoer, president and CEO of the Real Estate Roundtable, tells GlobeSt.com. “Then we had issues crop up in Europe, we had political gridlock regarding the debt ceiling here in the US and a general slowdown.” Little wonder, he adds, that this year expectations are based on that rollercoaster ride—especially as lot of the risks and potential problems still exist. “The experience of 2011 is definitely tempering people’s outlook for 2012,” DeBoer says.
The overall sentiment score is 68 for the quarter– up nine points since Q4 2011, (anything above 50 is positive) but still down from the score of 77 it posted a year ago this time. For instance, the survey reflected industry executives’ belief there will be modest growth in asset values. Only 6% of survey respondents said they expect a decline in values this year, while nearly 60% expect an increase.
Also, more than half of the survey respondents say they believe there will be growth in both debt and equity for commercial real estate—but deals will depend in large part on meeting lenders’ “ideal” expectations for asset and market conditions.
More discouragingly, many of the CEO pointed to the absence of a robust CMBS market. Without it, one said, it is hard to imagine how the debt overhang in the industry will be refinanced.
Indeed, that is one reason for the under current of gloom running through the survey. Besides lingering concerns left over from 2011, commercial real estate executives are well aware that this year begins the expected wave of commercial loan maturities underwritten during the height of the halcyon lending days in the early and mid-2000s.
“People in the industry continue to be concerned about how those mortgages and assets will work their way through the system,” DeBoer says.
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