Results of LoopNet Survey Regarding Recovery, Pricing, When Market WIll Hit Bottom

LoopNet, Inc., which operates an online commercial real estate marketplace with more than three million members, recently announced the results of a just-closed “LoopNet Pulse Poll.” More than 2,000 LoopNet members responded to the poll, which was conducted from July 16, 2009, through July 24, 2009.  LoopNet members include commercial real estate investors, brokers and owners who use the LoopNet marketplace to search for available space and investment opportunities, as well as to market available properties. Commercial Real Estate Market Recovery Timing?Investor sentiment regarding the timing of a recovery in commercial sales transactions has slipped since our last survey in May. Only 10% of respondents are expecting to see a recovery in 2009, vs. 33% in our last survey.  In addition, the number expecting a recovery to wait until 2011 has increased from 25% to 33%.   On the bright side, however, the number of respondents predicting the market will recover in 2010 has increased from 42% to 56%, with expectations for a Q2-Q3 uptick. There is general agreement on the timing of an increase in transaction volume across brokers, investors and owners, although slightly more investors expect an increase to wait until 2011.  Relative to the earlier survey, however, owners have had the most significant tempering of expectations.  In the May survey, 33% of owners anticipated a recovery in transaction volumes in 2010, which was far higher than the percentage of brokers or investors.  In the current survey, the percentage of owners anticipating a 2009 recovery has fallen to 10%, much more in line with the other two segments. Commercial Real Estate Sales Pricing Status?The relative consistency on the timing of the rebound in transaction volume across the different roles does not carry over into expectations about future price declines, suggesting there is still a difference in expectations between buyers and sellers.  Overall, respondents are expecting significant further declines in price, with 11-20% being the most prevalent prediction and about 20% expecting declines of 20% or more. When split by role, however, owners are more optimistic than investors.  Among owners, 28% believe that pricing has bottomed out already or will decline by 5% or less.  This compares to only 19% of investors.  The reverse holds true at the other end of the pricing spectrum, with 28% of investors expecting declines of above 20%, whereas only 19% of owners are that pessimistic.  Brokers are in the middle between the two, with 18% expecting 0-5% declines and 19% predicting greater than 20% declines. When Will Commercial Real Estate Sales Prices Hit Bottom?There was no clear consensus on when pricing will hit its lowest level, although the majority (60%) expects it to occur between Q4 of ’09 and Q3 of 2010, with a slight bias toward the first half of this time period.  Very few respondents believe that we have seen the end of price declines.  A substantial number (17%) expect continued declines through 2011. Which Property Sector Offers the Best Long-Term Investment Opportunity?Multifamily was the overwhelming favorite for offering the best opportunities for long-term investments in the current cycle.  This held true across all three major survey participant segments — brokers, investors and owners.