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Investors lack confidence in commercial real estate market: survey

October 04, 2011 03:39PM

More than 70 percent of 280 surveyed real estate CEOs, COOs and CFOs said they have a negative, or “bearish,” outlook for the commercial real estate sector over the next 12 months. The poll, cited by Reuters, was conducted by global law firm DLA Piper in connection with its Global Real Estate Summit held today in Chicago.

A lack of confidence in the Obama administration, the general gridlock in Washington and poor job growth were reasons behind the pessimism. Though sales have increased this year, and prices are up 12.5 percent from their lows in April, investors worry that the market will lose more footing.

“What you now see is a growing degree of uncertainty, and uncertainty begins to push money to the sidelines because people are much more reluctant to make a decision,” said Jay Epstien, a partner with DLA Piper.

The 29.4 percent of respondents who were bullish on the market cited increased opportunity for profit as a reason to be optimistic. Even the bears conceded on that point. Seventy-four percent said they did not expect interest rates to change, 67 percent felt cap rates would remain unchanged, and 24 percent believed they would rise.

However financing for deals will be hard to come by, according to about 90 percent of respondents. They expect the commercial mortgage-backed securities market to slow over the next year. Already, just $26.7 billion worth of securities have been issued thus far in 2011, down from $243.3 billion in all of 2007. [Reuters]