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Portfolio > Alternative Investments > Real Estate

Commercial Real Estate Executives Cautiously Optimistic

By thinkadvisor

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The Real Estate Roundtable’s first quarter sentiment index, released Friday, registered at 55, up seven points from the pre-election fourth quarter.

“The Trump administration and a new Congress are aiming to unshackle the economy by focusing on growth-oriented policies,” the Roundtable’s chief executive and president Jeffrey DeBoer said in a statement.

“As our Q1 Sentiment Index shows, leaders in commercial real estate are cautiously optimistic about what policy changes may bring, yet concerned about any potential unintended consequences that could threaten real estate’s vast contributions to the U.S. economy.”

A recent report on trends in the U.S. property market in 2017 said it would be characterized by continued strong fundamentals, increased investor flows and high transaction volume.

The Real Estate Roundtable’s overall sentiment index is scored on a scale of 1 to 100 by averaging current and future indexes; any score above 50 is considered positive.

The first quarter’s current-conditions index of 55 increased by four points from the previous quarter, and rose by one point compared with the first-quarter 2016 score of 54. 

At the same time, the future-conditions index of 55 rose by nine points from the previous quarter, and is up 10 points compared with the same time a year ago. 

The first-quarter index was based on a survey conducted among real estate executives in January by FPL Associates.

In other findings, many respondents expressed optimism about potential market opportunities and the U.S. economy.

However, the optimism was muted out of concern about potential tax policy reforms.

The survey found that although 36% of survey participants said asset prices were somewhat higher than a year ago, 43% said they expected generally flat valuations a year from now. The report said this reflected the view that many believe pricing has stabilized for certain property types.  

Some respondents also noted that inflows of private capital currently favored equity to debt, depending on the quality of the property. 

Foreign capital continues to pursue real estate investment opportunities in the U.S. market, making access to equity capital plentiful, according to the report.

It said construction lending remained hard to secure, but financing was available with competitive terms for high-quality, stabilized assets.

— Check out 20 Wealthiest Places in America on ThinkAdvisor.

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