Given the backdrop of historical political change-over in Washington, D.C. and record-setting stock market highs, rising interest rates continue to dominate concerns for U.S. commercial real estate executives in 2017, according to Seyfarth Shaw’s 2nd annual survey of the commercial real estate market.
Seyfarth’s 2017 Real Estate Market Sentiment Survey found that respondents are even more hawkish (98 percent) about interest rate increases this year compared to last year (90 percent). Of these “hawks,” 77 percent expect multiple rate increases in 2017.
From interest rates to equity sources to the new Administration, Seyfarth Shaw’s 2017 Survey examines the industry’s current market sentiment:
HOPEFUL SENTIMENT SPLIT: Respondents are evenly split regarding how many basis points the commercial real estate market can absorb before experiencing a material adverse impact: 51-100 Basis Points (33 percent) vs. 101-150 Basis Points (32 percent).
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FED FEARS: With the Federal Reserve announcing its intention to raise interest rates multiple times in 2017, respondents again rank rising interest rates as their top concern for 2017. Notably, political change-over and tax policy rank fourth and fifth this year, overtaking maturing CMBS loans from the year before.
TERRORISM TODAY: An overwhelming majority of respondents (83 percent) are not concerned that an act of domestic terrorism will impact their projects in 2017, compared to 70 percent last year. Of the remaining 17 percent, a majority will consider their decision to buy, sell, capitalize and lend in response to such an incident.
EQUITY PLAY: 36 percent of respondents indicate that Institutional Investors would be their primary source of equity, 21 percent report no engagement of third party equity.
LINGERING CMBS CONCERNS: As in 2016, concern regarding the industry’s ability to refinance record levels of maturing CMBS loans remains strong: 86 percent of respondents express concerns about the industry’s ability to refinance the CMBS debt that is maturing in 2017, nearly matching 87 percent in 2016.
WHITE HOUSE IMPACT: Last year, Republican candidate Donald Trump was the clear frontrunner among commercial real estate executives. Over two-thirds of respondents this year believe that the Trump Administration will have a positive impact on the 2017 commercial real estate market.
RED TAPE RELIEF: Of the respondents who believe the Trump Administration will have a positive impact on CRE in 2017, Deregulation was top of mind with most respondents followed closely by Tax Reform. Notably, as the Administration poises to take on Dodd-Frank, many survey respondents single out its dismantling as a positive impact for the industry.
BREXIT BLUSTER: More than half of respondents are not at all concerned about Brexit’s impact on the U.S. market.
Seyfarth, which helped clients close more than $33 billion in real estate transactions in 2016, surveyed commercial real estate executives in January. For a full copy of the 2017 Seyfarth Real Estate Market Sentiment Survey, visit here.