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DLA Piper survey: Most CRE execs still bullish on industry

DLA Piper survey: Most CRE execs still bullish on the industry,ph01

Commercial real estate executives expect the next 12 months to be strong ones for the U.S. commercial real estate market. But they’re not quite as optimistic on the industry as they were earlier this decade.

That’s the main takeaway from this year’s State of the Market Real Estate Survey released by DLA Piper on the eve of the company’s Global Real Estate Summit held today in Chicago.

This year’s survey was distributed to top CRE executives from the end of July to the end of August, and it asked these execs what they expected of the commercial industry for the following 12 months. The good news is that the majority of these executives expect the commercial real estate industry to be a strong one in the immediate future, with 60 percent of respondents saying they were bullish about it.

This was, though, a bit lower than last year, when 62 percent of execs said they were bullish about the commercial real estate industry. And the percentage of positive execs was lower than in 2013 and 2014, when top CRE players were most excited about the future prospects of commercial real estate.

DLA Piper reports that CRE execs are most concerned about how long the current good times for the industry can last. Respondents, of course, know that the current positive economic cycle is now several years old. These same respondents see plenty of turmoil across the globe. They have questions, then, about how long the good times in the industry can last. On the plus side, the United States clearly remains the safest destination for those who want to invest in commercial real estate.

What does make CRE execs feel optimistic? DLA Piper reported that 45 percent cited abundant debt and equity capital while 35 percent pointed to the strength of the U.S. economy. Those who were more pessimistic about the future of CRE pointed to domestic and geopolitical uncertainty (53 percent) followed by rising interest rates (15 percent).

Most respondents also told DLA Piper that they believe foreign investment in U.S. commercial real estate will remain strong, with the majority saying that Chinese investors will remain the busiest. A total of 32 percent of respondents said foreign investors will be the most active investors in the United States, followed by private equity (28 percent), pension funds (26 percent) and REITs (19 percent).

In a bit of a surprise, survey respondents had mostly positive views of the retail sector. Respondents said that the retail industry does need to make changes to survive, but with most saying that these changes are entirely possible.

Only 8 percent of respondents said that the retail industry was doomed, while 68 percent said smart retailers would find the right balance between brick-and-mortar and e-commerce through omni-channel retailing. DLA Piper found that another 21 percent said retail would be successful in its repositioning through new mixed-use projects.

The most popular sectors for commercial property investment? More than half of the respondents – 56 percent – said that healthcare would be the most attractive during the next 12 months, while 53 percent pointed to industrial. Data centers, with 31 percent of respondents citing them, came in third place.