Real Estate Executives Optimistic about Property Market Prospects in ‘13, by DLA

File Type: Free Content, Article
Release Date: June 2013
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An overwhelming majority of commercial real estate executives are optimistic about the sector’s prospects for 2013, according to DLA Piper's 2013 State of the Market Survey. Real estate executives cite the strengthening economy, low-cost financing afforded by artificially low interest rates and easier access to capital as the top reasons they are feeling good about the year ahead.

The survey, measuring the attitudes and perspectives of 189 top executives within the commercial real estate industry, reveals that 85 percent of respondents describe their 12-month outlook for the U.S. commercial real estate industry as “bullish,” reversing a far more pessimistic outlook that prevailed in 2011 when only 30 percent of commercial real estate executives described their outlook that way. This is also a tremendous leap forward from 2008, when just 10 percent of respondents had a positive mindset for the sector.

While most executives don’t expect to see a sustained, broad economic recovery lift real estate fundamentals this year, most expect real estate capitalization rates to remain steady or even go down some, keeping commercial property values aloft and perhaps even boosting them to new highs.

“The market is being driven by low-cost financing and an abundance of capital seeking investments, and there is little concern that interest rates will rise in the near term,” said Jay Epstien, chair of DLA Piper's U.S. Real Estate practice and co-chair of the firm’s Global Real Estate practice. “Although a spike in interest rates would reverberate throughout the market, the main risks come from slow job growth and political gridlock in Washington – neither of which are likely to be resolved anytime soon.”