New Real Estate Roundtable Survey Shows Commercial Real Estate Market Conditions Weakening

Credit Market Dysfunction, Weakening Property Values Seen to Continue

WASHINGTON D.C. - August 21, 2008 - (RealEstateRama) — The Real Estate Roundtable has released a new quarterly economic index to help gauge senior real estate executives’ views about current and future conditions in commercial real estate markets, as well as credit and capital markets and the U.S. economy as a whole.

In the latest (3rd quarter 2008) survey, respondents confirmed that problems in U.S. financial markets and the broad economic downturn are having a negative effect on income-producing real estate — encompassing office buildings, shopping malls, warehouses, hotels, and apartment buildings.

Notably, 84 percent said credit availability is “much worse” than it was one year ago. Equity financing conditions are worse as well, but not to the extent seen on the debt side (51 percent characterized equity financing as “somewhat worse” than one year ago; only 23 percent said conditions are “much worse”). Changes in expectations for the coming year have declined since April ’08 by 10 percent for general real estate and by 6 percent for capital markets. Almost no respondent expects a significant improvement for the next 12 months.

“Unlike prior cyclical downturns, commercial real estate fundamentals remain relatively strong going into this downturn. Despite this strength, commercial real estate is viewed as a lagging economic indicator and is subject to the effects of the broader economy. There is growing concern about where commercial property net operating income might be trending given general economic conditions,” said Roundtable President and CEO Jeffrey D. DeBoer. “Real estate continues to face one of its biggest liquidity challenges in over a decade. Even though loan delinquencies to the sector are very low, the ongoing lack of credit for real estate has led to weaker property values and has stalled transactions.”

More than half of those polled expect “somewhat better” conditions in the overall real estate market (42 percent). Only 13 percent anticipate “somewhat higher” asset values in overall real estate markets in the 3rd quarter of 2009, while 44 percent expect real estate asset values to be “somewhat lower.”

“Going forward, The Roundtable’s economic index will become an indispensable tool for policymakers in Congress and the Administration, real estate industry participants, researchers and others who seek a quick snapshot of conditions in U.S. real estate markets, along with capital and credit availability and a sense of our industry’s confidence in the economy as a whole,” said Roundtable President and CEO Jeffrey D. DeBoer.

DeBoer noted that the roughly $5 trillion income-producing property sector is highly sensitive to developments in the overall economy as well as specific sectors such as finance, insurance, energy, manufacturing and tourism.

“Despite current challenges, we remain encouraged by U.S. real estate markets’ historical resilience,” DeBoer continued. “This is why we strongly urge lawmakers and regulators to tread carefully and avoid overreacting with hastily crafted policies that could create more problems than they solve. Lawmakers should be especially cautious as they consider ways to address the credit crisis, broader liquidity and risk pricing issues, and perceived inequities in the tax code. Likewise, proposals that paint all real estate lending with one broad brush could inadvertently become a self-fulfilling prophecy and must be rejected.”

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About The Real Estate Roundtable Sentiment Survey
As the industry’s most comprehensive measure of senior executives’ confidence in the real estate environment, The Real Estate Roundtable Sentiment Survey, conducted by FPL Advisory Group on behalf of the Real Estate Roundtable, captures the perspectives of over 100 senior real estate executives, including CEOs, presidents, board members, and other executives from a broad set of industry sectors including owners and asset managers, financial services firms and operators.

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About The Real Estate Roundtable
The Real Estate Roundtable brings together leaders of the nation’s publicly-held and privately owned real estate ownership, development, lending and management firms with the leaders of national real estate trade associations to jointly address key national policy issues relating to real estate and the overall economy.  Collectively, Roundtable members’ portfolios contain over 5 billion square feet of office, retail and industrial properties valued at more than $1 trillion; over 1.5 million apartment units; and in excess of 1.3 million hotel rooms.  Participating trade associations represent more than 1.5 million people involved in virtually every aspect of the real estate business.

Contact:
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