Economy Watch: CRE Execs a Little More Cautious

Many commercial real estate sectors have been strong since the end of the recession, but some industry executives are beginning to grow more cautious about the future, according to DLA Piper’s 2016 State of the Market Survey, which was released recently. Although 62 percent of the surveyed real estate executives remain bullish about the industry over the next 12 months—a reasonably strong percentage—that’s down from 89 percent in 2014.

Although the survey’s 2016 findings don’t point to a return to the outright pessimism seen during and immediately after the global financial crisis, the concern appears to be driven by an increased volatility in domestic and international stock markets and a feeling that property prices might be at or near a peak. Of the 38 percent of respondents who said they were bearish in their 12-month outlook, 48 percent attributed their stance to continued volatility in domestic and international stock markets.

Even so, respondents saw bright spots, such as strong opportunities in non-gateway cities in the US, with Austin, Seattle and Miami expected to perform best. These markets are appealing to investors’ desires for income, but they aren’t nearly as expensive as gateway cities like New York and San Francisco.

Survey respondents also shared some perspectives on how Millennials will be top of mind in strategies regarding buying, retrofitting, and developing properties. As one respondent put it, “With Millennials focused more on experiences than consuming products, retail investments located in areas with high tourism are increasingly important.”