Dive Brief:
- In the CIT Group's 2016 Commercial Real Estate Outlook survey of real estate executives, 52% of respondents said they believe the market is strong, and 71% said that they have enough access to investment capital.
- CIT found that 47% of executives see the commercial real estate market as recovering, and 44% said that certain segments of the market will decline; therefore, a reasonable 60% responded that they see opportunities as well as challenges in the commercial market.
- A majority of respondents to the survey (55%) also said that technology is "revolutionizing" the industry, but a mere 11% considered themselves "leading-edge" when it came to taking advantage of it. As far as green building, 34% said that tax credits and grants have been influential in their decision-making process regarding implementation of green design elements.
Dive Insight:
Respondents reported five primary drivers of commercial real estate investment: interest rates, consumer confidence, U.S. tax rates, unemployment and the global economy. The industry, however, is divided as to whether or not the downsizing of the baby boomer demographic and the mandatory inclusion of affordable units in some developments has resulted in a positive or negative effect on the commercial market.
As far as financing for commercial real estate projects, a little more than half of respondents to the survey said that they are taking longer-term financing deals so that they can benefit from low interest rates for as long as possible. Overall, CIT Group reported that respondents were "relatively optimistic about the general state of the market in 2016."
In Dodge's most recent Momentum Index report, it found that commercial projects hit a bit of a development wall, with nearly flat activity year over year, and that commercial planning for April had increased only 0.8% from March. However, CMD predicted last week that 2016 construction starts, both residential and nonresidential, would increase by 7.4% in the remainder of the year, driven largely by a 6.4% boost in commercial projects like office buildings, transportation terminals and medical facilities.
The main trends reported by executives in CIT's survey — especially the growing presence of technology and green building in the industry — echo the trends reported by leading architects in the American Institute of Architects' February survey. In the study asking their perspectives on how nonresidential building design will change over the next 10 years, architects said renewable energy and technological innovations will play key roles.
