Current Commercial Real Estate interest RatesActual interest rates for commercial real estate
In line with last year's mood, the majority of those surveyed are hawk-like: 98 per cent anticipate interest rates hikes from the Federal Reserve in 2018, with a third of real estate managers expecting three hikes in the next 12 month. With the real estate sector welcoming the new Trump taxation reductions, low levels of joblessness and equity markets performance, sector insiders anticipate that today's drivers will compel the new Fed chair to take the lead in shaping their 2018 investing strategy.
Seyfarth Shaw's 2018 survey investigates the current mood in the sector, from the new fiscal policies to the emergence of carpooling: Interviewees strongly believe that repeated interest hikes will begin to have a significant negative effect on the commercial real estate markets. Featuring big issues about deficits and budgets, 63 per cent of commercial real estate managers believe that the sector can cope with an 51-150 bps surge.
While a new marshal will take responsibility for the Fed, analysts will remain focused on fundamental data by identifying increasing interest rates and CRE supply/demand as their key sector priorities. In particular, policy volatility is a major problem, while worries about bank regulation have subsided and worries about a barrier of matured CMBS exposures are past their apex.
In the past year, interviewees put the fiscal reforms at the top of the list when it came to the Trump Administration's anticipated beneficial effects on real estate. With this now a fact, most interviewees (58 percent) believe that the new Act will prolong the sector's virtuous circle by at least one to two more years - until the 2020 general elections.
Forty-three per cent of those surveyed believe that the increase in carpooling opportunities will have an effect on the way real estate is analysed and/or developed. Because of the increasing effectiveness and attractiveness of carpooling, real estate managers are reevaluating their real estate by reducing the need for car parks and closeness to local transport. Cyber attacks are a result of the FBI's and Homeland Security's continuing effort and have not yet had a profound effect on the real estate world.
However, a significant number of people ( 46 percent) are still worried about a cyber attack in 2018 affecting their business. Although a favorite issue among radiators across the nation, a large percentage of those surveyed (96 percent) state that they have no intention of including crypto currency in their CRE operations in 2018.
As more investments from third parties are anticipated this year than in 2017, the most important principal resources for those surveyed in 2018 will be provided by venture capital and corporate institutions. This year, ranked No. 1 in the ranking from No. 3, it is considered the premier resource due to its new fiscal advantages and the current favourable business environment.
The majority of those questioned (73 percent) reported that infrastructures will not be part of their overall investments at all. Even though not yet published at the moment of the poll, the new law on public administration infrastructures is a heavy strain on towns and villages - a possible cause for worry for real estate managers. In January, Seyfarth, which assisted customers complete more than $30 billion in real estate deals in 2017, interviewed commercial real estate managers.
A complete copy of the Seyfarth Real Estate Market Sentiment Survey 2018 can be found here.