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July 29, 2014

Executives Think Globally, Offer Upbeat Outlook: CPE 100 Quarterly Sentiment Survey

By Paul Rosta, Senior Editor

As commercial real estate becomes increasingly global, the latest CPE 100 Quarterly Sentiment Survey confirms that a growing number of industry executives are thinking beyond American borders. One-third of respondents to the second-quarter survey said the global real estate market has become more important to their business in the past 12 months, while half of respondents said the global market’s impact on their businesses remains unchanged.

The executives surveyed said that investment and investment management offer the greatest potential during the next 12 to 18 months. Nearly six in 10 cited these sectors as offering the greatest growth opportunities beyond U.S. borders. Other business categories—development, capital markets and the service sector—trailed far behind. Geographically, Europe emerged as the region of choice, earning votes from 33 percent of respondents. The runner-up, Latin America, was named by one quarter of those surveyed. Survey results are based on the regular quarterly poll of the CPE 100, an invited group of industry leaders representing a broad spectrum of business specialties.

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“Crossborder capital flows, alliances between U.S.-based firms and foreign companies, and expanding offshore investment by U.S. companies underscore the global nature of commercial real estate,” noted CPE Editorial Director Suzann D. Silverman. “A growing number of executives recognize that their strategies must take these trends into consideration.”

The CPE 100’s responses follow a flurry of international activity by real estate firms based in the United States during the first half of 2014. Several firms entered new markets or expanded their footprints in existing locations. In late May, DTZ announced that it had opened an office in Mexico City that will serve as the service firm’s Latin American headquarters. With an eye toward fostering continued growth of its service business in the United Kingdom, Colliers International acquired London-based H2SO Property Consultants. And on July 9, USAA Real Estate Co. said it was launching European investment operations; Amsterdam will serve as the headquarters of the new business.

“Western Europe will remain a prime target for U.S. capital, given that the region regains its economic footing and property valuations remain attractive,” said CPE Senior Associate Editor Mike Ratliff, the Sentiment Survey’s coordinator. “We have heard several investors and investment advisors say they are taking a hard look at retail product, particularly in Spain.”

U.S.-based companies are also continuing a steady stream of international investment and development activity. Tishman Speyer announced its latest acquisition in London on July 16—a 232,772-square-foot office building in the Paddington section of the West End. Prologis Inc. revealed additions to its pipeline that include three logistics facilities totaling 3.2 million square feet targeted toward serving the Tokyo area,  a 447,000-square-foot distribution center near Beijing and a 500,000-square-foot project in Monterrey, Mexico. The REIT has also acquired properties in Budapest and in Gliwice, Poland.

Meanwhile, CPE 100 members remained confident about the outlook for their own companies at midyear. Respondents’ optimism about the future performance of their companies reached a new high, as 75 percent of respondents said they expect their companies to be performing better in three months. That is slightly more than the 64 percent who said that their business will be performing somewhat better during the first quarter and represents the strongest such show of confidence recorded by the Sentiment Survey to date.

A majority of executives, 58 percent, say that the real estate industry as a whole will be doing better in three months, slightly less than the 64 percent who answered in the affirmative during the first quarter. Optimism about the economy appears to be fueling executives’ upbeat outlook; 67 percent expect business conditions to improve during the next three months.

“On the home front, we continue to see employment improve with an average of 272,000 jobs added in the months of April, May and June,” Ratliff noted. “The housing market has shown signs of improvement, and positive results in this earnings season seem to have counteracted worries over the economic impact of U.S. and European Union sanctions against Russia, as far as Wall Street is concerned.”

 

 

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