Q4 Sentiment: Steady Improvement in Commercial Real Estate Markets Tempered by Concerns Over TRIA, Policy Uncertainty, Interest Rates
CRE Executives See Continuing Recovery But Remain Wary of Scheduled Dec. 31 Expiration of Terrorism Risk Insurance Act (TRIA) and Underlying Conditions When Interest Rates Rise
WASHINGTON, Oct. 31, 2014 /PRNewswire-USNewswire/ -- Senior commercial real estate executives report a continuing recovery in CRE markets, yet emphasize that uncertainty over legislative and monetary policies – such as the scheduled year-end expiration of the Terrorism Risk Insurance Act (TRIA) and the prospect of higher interest rates – tempers their optimism about future growth, according to The Real Estate Roundtable's Q4 Sentiment Survey.
Survey respondents note that solid fundamentals and steady asset values in core "gateway" markets are finally starting to drive recovery in secondary markets. As a result, the Roundtable's Q4 "Overall" Sentiment Index remains at 70, consistent with the previous quarter – and up three points since Q4 of last year.
"On the eve of the congressional mid-term elections, our Sentiment Index shows favorable views about current market conditions, yet also reflects concerns about the lack of clear direction in many federal policies, primarily terrorism risk insurance. Without a long-term reauthorization of TRIA when policymakers return in November, financing for CRE projects will be directly threatened, job creation will suffer as it did after 9-11, and businesses can expect a general slowdown as many financing contracts will be found to be in technical default without terrorism insurance," said Roundtable President and CEO Jeffrey D. DeBoer.
"Even though commercial real estate executives report strong capital flows, improving business operating fundamentals and low interest rates, our survey also registers concerns about what the underlying economic conditions might be when rates eventually rise, potentially affecting the flow of capital and real estate pricing. Now that the Fed has ended its monthly bond purchases, interest rate concerns are moving to the forefront. But in the near-term, our survey shows the need for reasonable action on policies affecting CRE, such as the urgent situation with TRIA," DeBoer noted.
[The Overall Roundtable Index is scored on a scale of 1 to 100 by combining the average of the Future Index and the Current Index. To register a perfect Index of 100, all respondents would have to answer that they believe conditions are "much better" today than one year ago and will be "much better" one year from now. This quarter's "Current" Index rose two points (to 74 from last quarter's score of 72) while the "Future" Index dipped two points (to 65 from Q3's score of 67). Data for the survey was gathered October 1–15 by Chicago-based FPL Associates on The Roundtable's behalf.]
For the full survey report and The Roundtable's 2014 Policy Agenda (Together: Real Estate, Jobs, Economic Growth) and 2014 Annual Report (Leadership-Action-Solutions: Celebrating 15 Years), visit us online at www.rer.org.
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SOURCE Real Estate Roundtable
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