Survey Weighs Future of Sector Performance

NEW YORK CITY-Poor Q1 reports and economic woes have dotted the landscape of a struggling economy in 2008. Yet while other sectors cause some doubt, the multifamily sector perseveres in the minds and opinions of real estate professionals, while retail stumbles.This week, the Chicago-based financial and professional services firm, Jones Lang LaSalle, surveyed 80 nationwide property owners, development firms and professional services firm/consultants attending the Urban Land Institute’s Spring Council Forum in Dallas. There were positive and negative predictions in all sectors, but the multifamily was where most of the confidence lay, and retail had the least.

The most positive outlook came from those surveyed regarding the multifamily sector, which many felt provided the “best potential” to outperform. A resounding 52% were predicting upward movement from zero to 30% over the last year. An optimistic 16% of respondents think multifamily investments will “outperform the previous year at 75% or more.” Those that felt multifamily investments will fall zero to 10% totaled 22%, while no one thought it would fall by 20% or higher.

“While the fundamentals in commercial real estate have remained strong, one would think concerns of a faltering economy combined with a lack of affordable debt would decrease market expectations for 2008,” says Jack Minter, Managing Director of Investment Sales at Jones Lang LaSalle, in a statement. The opinions for the retail-investment sector did not disappoint in this regard.Retail garnered the most negative reviews with 44% of those surveyed predicting it will underperform in 2008 from zero to 20%. Another 16% feel retail will underperform by 20% or more. Although a positive group of 12% “believe retail will secure a performance premium of 75%” or more than last year, they find themselves in the vast minority.

The industrial and office sectors were less dramatic in their results. Those surveyed gave a moderate review for industrial with 13% saying it will outperform 2007 by 75% or more and 15% saying it will underperform by 10% or more. The majority of respondents, at 33%, predicted a zero to 10% underperformance for industrial. The office sector inspired an evenly split prediction, as well with 42% predicting that it will underperform from zero to 20% and 30% thinking it will bring “a performance premium of zero to 30%”. Related to 2007, 14% say they think office “will outperform at 50% or more”.

Minter said, of the responses, “These survey results reveal the true picture with 45% of respondents expecting to increase their investment/development activity. This survey indicates what many in the industry have been feeling–the market is holding steady.”