Industry Pros Say Outlook Still Good
In Grant Thornton LLP’s 2008 Real Estate Survey, nearly six in 10 real estate executives (57 percent) have a pessimistic outlook regarding the U.S. economy for the next year, and almost half of the respondents (48 percent) have similar feelings about the real estate industry’s business outlook. These numbers show a sharp decline in optimism from 2006, when only 15 percent of respondents had a pessimistic outlook about the economy, and a scant five percent were pessimistic about the real estate industry’s outlook.
According to a news release, despite the pessimistic economic and industry outlooks, respondents’ attitudes toward their own companies remain much more positive. Half of the respondents express an optimistic outlook for their own companies in the coming year, and only 12 percent had a pessimistic outlook. In 2006, 80 percent of respondents had a positive outlook for their own companies in the next year.
When asked about the single most important issue facing their industry in the next year, more than one-third of real estate executives (36 percent) chose the national economy. Other concerns included earnings and operation results (21 percent), the ability to access capital (19 percent), tenant relationships (10 percent), and rising costs (5 percent), among others.
Survey respondents also weighed in on anticipated rate changes in the market. These are some of the predicted rate changes in the coming year:
- 69 percent think the unemployment rates in their market will increase.
- Three-fifths (61 percent) predict vacancy rates will rise in their market.
- 79 percent of respondents expect capitalization rates to increase nationally.
- 76 percent believe the capitalization rates will increase in their market.
- Half of respondents (51 percent) think interest rates will decrease.
The real estate executives were polled in two ways. First, an invitation to participate in the online survey was sent to nearly 1,900 real estate contacts in Grant Thornton’s database. The effort was followed up with a communication to 4,000 developers, owners and investors who are members of the National Association of Industrial and Office Properties (NAIOP). NAIOP’s members include developers, owners, investors and other professionals in the industrial, office and mixed-use real estate industry.
Respondents of the survey described themselves as developers (41 percent), real estate investors (17 percent), real estate owners (11 percent), and asset managers (9 percent). Others included real estate property managers (5 percent) and construction contractors (1 percent). CQX