On December 8, the National Association of Realtors published a blog post in which Lawrence Yun, the organization's chief economist, expressed his outlook for commercial real estate (CRE). His overall message was one of cautious optimism.
In November, we performed a short survey of our regional commercial real estate contacts to ascertain where this sector stood with regard to actual and expected performance. The results, which also show some cautious optimism, are summarized below.
We asked how contacts evaluated conditions in the CRE sector relative to the first part of 2011. A bit less than half of the respondents indicated that conditions in the commercial real estate sector have remained "about the same" relative to the first part of 2011. Approximately a third felt conditions were either "much or somewhat better" than earlier in the year, whereas about 20 percent said conditions were "somewhat worse." No one reported that conditions were "much worse."
Approximately 61 percent of survey respondents expect commercial real estate conditions to remain the same for the next few quarters, while 28 percent expect conditions to improve and 11 percent expect things to worsen.
In terms of purchases of existing properties since the first part of the year, 67 percent say financing has remained the same, while an equal number of respondents reported conditions were either better or worse. As for development and construction of new properties, 61 percent indicated that financing conditions were the same, while 31 percent felt things were worse and only 8 percent said they were better. The majority of respondents indicated that the availability of credit, the ability to refinance, and the loan terms have not changed.
All in all, our survey revealed some modest progress in the region's CRE sector, but it’s also clear that optimism in the Southeast and nationally is modest as well.
By Shalini Patel, senior economic analyst in the Atlanta Fed's research department