Multifamily Is Most Attractive Investment Opportunity, Say 50% of Respondents in DLA Piper Study
- Oct 02, 2008
By Anuradha Kher, Online News EditorNew York–Following September’s unprecedented events on Wall Street, the current credit crisis has now eclipsed the savings and loan crisis of the late ’80s and early ’90s as the event with the single-greatest impact on the U.S. real estate industry over the last 20 years, according to a national survey conducted by global law firm DLA Piper. Sixty-two percent of those surveyed say they do not expect the real estate markets to stabilize until 2010. The survey, measuring the attitudes and perspectives of 424 top executives within the commercial real estate market, also reveals that 50 percent of those surveyed rank multifamily as the most attractive investment opportunity, by a wide margin, over the downtown office sector (19 percent). “I would agree that the consequences of the single-family crisis run to the benefit of multifamily,” Jay Epstien, chair of DLA Piper’s US Real Estate practice, tells MHN. While the credit crunch has affected multifamily to some degree, Epstien explains that it has been a little easier for the sector. “Factors such as growing occupancy and people not buying homes have been good for multifamily, especially in big cities. Even now, it is only the secondary and tertiary markets that will face serious challenges as a result of this crisis,” he adds.The survey also reveals a record level of “bearish” sentiment. Nine out of 10 respondents (90 percent) describe themselves as bearish, up sharply from 68 percent in October 2007 when DLA Piper last surveyed the market in its 2007 “Credit Crunch” Real Estate Survey. This survey was initially conducted between Aug. 27 and Sept. 5, when the majority of respondents said the savings and loan crisis was the event with the greatest impact on the real estate industry but that sentiment changed in a follow-up survey conducted after Lehman Brothers filed for bankruptcy. “On the heels of the Lehman bankruptcy, the unprecedented government bailouts of Bear Sterns, Fannie Mae, Freddie Mac and AIG, and the historic proposal of a $700 billion financial institutions rescue plan, we remain in a very fluid situation in the capital markets that likely will continue to bog down the U.S. commercial real estate market until financing finally becomes available on a predictable basis again,” adds Epstien.There are plenty of entrepreneurs, he adds, who are ready to take advantage of investment opportunities that will arise after the markets settle and real estate prices adjust themselves in the next 12 to 24 months. The survey yielded a number of other conclusions, including:Eight out of 10 respondents do not believe that the recent developments concerning Lehman Brothers, AIG and Merrill Lynch signal the “bottom” of the cycle, nor do respondents think they provide the “first sign of light” at the end of the credit crisis tunnel. The majority of respondents don’t expect securitized lending to recover and return to its previous market levels until at least 2011, while 16 percent reported that securitized lending will never again reach its prior levels.The majority of all respondents (51 percent) expect foreign investors to be the most active in the US during the next year and, consistent with that conclusion, nearly one in five respondents has engaged in a transaction involving investments from sovereign-wealth funds.