Executives and investors are still optimistic about the commercial real estate market and the U.S. economy, even as they prepare for an expected downswing in the national economy.
That’s the takeaway from the 10th annual Akerman U.S. Real Estate Sector Report released earlier this month.
Law firm Akerman interviewed more than 200 C-suite and senior executives to produce their report. These executives said that federal tax reform and the growth of technology have spurred growth in the commercial real estate industry. But they also pointed to the likelihood of a market correction as one cause for concern.
The survey found that a record-high 70 percent of respondents said they were more bullish about 2019 commercial real estate market activity than they were about activity in 2018. Nearly half of respondents – 46 percent – point to the continued improvement of the U.S. economy as the primary driver of this increased confidence.
This doesn’t mean, though, that executives don’t have concerns. A third of respondents said they were concerned about uncertainty surrounding interest rates, while 23 percent said they were concerned about global economic conditions. An additional 22 percent said that the uncertainty of federal government policy in the United States concerned them.
“While the U.S. real estate market has remained resilient since the economic downturn, the headwinds we expected coming into 2019 are starting to come to fruition,” said Eric Rapkin, chair of Akerman’s national Real Estate Practice Group, in a written statement. “Nonetheless, capital is still chasing deals, especially in gateway markets, and we’re beginning to see executives capitalize on tax advantages and deferral strategies such as Opportunity Zones.”
Commercial executives are excited about the Tax Cuts and Jobs Act passed in December of 2017, with 56 percent of respondents ranking tax reform among the top three trends they expect to have a significant impact on real estate development during the next three years.
Executives are also expressing more interest in Opportunity Zones, according to the Akerman survey. Nearly a quarter of respondents ranked Opportunity Zones among the top three areas they believe will fund the most commercial real estate debt and/or equity this year.
Technology advances matter to executives, too. According to Akerman’s survey, 48 percent of executives listed technological advancements as among the top three trends that will have a significant impact on real estate development during the next three years.