Commercial real estate executives are cautious. But they’re also optimistic. That’s the takeaway from DLA Piper’s 2019 State of the Market Survey.
The survey gauges the confidence that executives across the United States have in the country’s commercial real estate market. When asked on a scale of one to 10 – with 10 being the most bullish – how confident they were in the market, most respondents answered with a six or seven, DLA Piper said.
That’s an indication that CRE executives are cautiously optimistic about the next 12 months of the market.
What’s behind this confidence? According to the survey, 48 percent of executives pointed to the strength of the U.S. economy while 43 percent cited the abundance of available investment capital.
“Despite a slowing global economy, the U.S. CRE market continues to grow, spurred in part by evolution within the industry,” said John Sullivan, chairman of DLA Piper’s U.S. Real Estate Practice and co-chairman of its Global Real Estate practice. “Some of the opportunities created by this evolution are innovative new technologies that are changing CRE and attracting investors into the market.
Sullivan said that while the continued optimism of CRE executives is encouraging, the survey also showed that these executives do have some concerns about the commercial real estate market’s immediate future.
The biggest concern? CRE executives pointed to political uncertainty. According to the survey, 37 percent of respondents who were more bearish on the future of commercial real estate said that domestic and/or international political uncertainty was the main reason.
Other reasons for bearish sentiments? A total of 13 percent of responsents pointed to low cap rates, 4 percent to a dip in foreign investment and 4 percent to decreasing investor appetite.
The survey also asked real estate executives about the most important trends hitting the CRE industry. Leading the way, in no surprise, was the continued growth of e-commerce, with 85 percent of respondents citing this as a major trend. A total of 78 percent of respondents said that the continuing evolution of logistics and warehousing would be a big trend while 59 percent cited the continued growth of the sharing economy.
About half of respondents – 45 percent – said that investment in opportunity zones will increase substantially in the next 12 months. ALso, 55 percent of survey respondents said that Canada will be the most likely source of foreign investment in U.S. commercial real estate during the next 12 months.