Updated: RER Survey Says Commercial Real Estate Feeling the Strain

Income-producing real estate is feeling the strain of persistent turmoil in the world’s financial markets and the downbeat outlook for the U.S. economy, according to the latest survey of real estate executives by the Real Estate Roundtable, which was released today. Still, a majority of those surveyed expected some improvement in the not-too-distant future. The survey, conducted for the Washington, D.C.-based Roundtable by FPL Advisory Group, polled over 100 upper-level managers in the real estate industry, including CEOs, presidents, board members and other executives to get a C-suite eye-view of the market. The participating executives hailed from across the spectrum of the industry, including owners and asset managers, financial service firms, and operators. “This information is important because commercial real estate in America is valued at about $5 trillion dollars, and state and local budgets are highly dependent on healthy property values, and there are millions of jobs associated with the real estate industry,” Roundtable president and CEO Jeffrey D. DeBoer said in a conference call this afternoon. “Our survey shows that these decision-makers feel that the income-producing real estate economy is in trouble, not because of the overall fundamentals, but because the financial markets are dysfunctional.”Notably but not surprisingly, a vast majority of those surveyed — fully 84 percent — said that credit availability is “much worse” than it was a year ago. Equity financing conditions are believed to be worse as well, but hardly to the extent as the debt side; 51 percent characterized equity financing as “somewhat worse,” while only 23 percent thought it was “much worse.” Looking ahead, nearly two-third of the respondents were optimistic that debt market conditions would improve in the coming year, though few expected them to be “much better.” Very few, in fact — only 1 percent felt that way. Some 57 percent, on the other hand, thought debt markets would be “somewhat better,” while 24 percent thought things would be “able the same.” As for the overall condition of the commercial real estate market, more than half of those polled expected “somewhat better” conditions next year. Still, only 13 percent expected “somewhat higher” asset values by the third quarter of 2009, while 44 percent though those values would be “somewhat lower.””By and large, these are national results,” DeBoer said. “Having said that, there certainly are differences between various markets, just as in the residential market. The real strength of the survey is its industry-wide result, with the number of participants that we have. “Washington, I’m happy to say, has been focused on this issue for many months,” he continued. “The administration, Congress and the Fed have each been active in seeking solutions to the financial market’s problems. This survey, however, should serve as a continuing notice to lawmakers that they need to continue with that focus. Executives in our industry clearly believe conditions will not improve in the next several months.”