November 8, 2018
Commercial real estate executives continue to see strong and balanced market conditions for the remainder of 2018 and moving forward into the new year, according to The Real Estate Roundtable’s Q4 2018 Economic Sentiment Index.
Roundtable President and CEO Jeffrey DeBoer says, “Our latest Sentiment Index finds commercial real estate industry leaders experiencing continued positive market conditions and cautiously predicting solid performance into 2019. Concerns exist about interest rate and construction cost increases, as well as labor shortages. However, these concerns have not yet caused significant market disruption.”
The Roundtable’s Q4 2018 Sentiment Index registered at 50, a two-point decrease from Q3 2018. This quarter’s Current Conditions Index of 53 decreased by three points from the previous quarter. This quarter’s Future Conditions Index of 47, decreased by two points from the previous quarter.
DeBoer added, “After the midterm elections we look forward to continuing to work on positive, pro-growth national public policy. The nation needs policy action to address the growing labor shortage and infrastructure needs. The terrorism risk insurance act will also need to be extended in the new Congress.”
The report’s Topline Findings include:
– Responders pointed to the increase in costs for constructions projects, and the corresponding decline in development returns, as a concerning market factor. As a result, fewer responders were highly optimistic about market conditions in 2019, as yield becomes increasingly hard to find.
– For the first time in many quarters, a large proportion of responders are indicating a belief that asset values will start declining. However, pricing is expected to stay relatively strong for assets in major markets.
– Responders feel debt and equity capital are plentiful in today’s market. Equity investors and lenders alike continue to show a strong appetite for real estate.
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