Surveys

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State of the Market Surveys

Equity prices have reached historic highs, the US unemployment rate fell to its lowest point in more than a decade and there is hope that Congress will lower corporate tax rates. American business leaders would appear to have ample cause to be optimistic.

But among US commercial real estate executives, optimism has continued to level off after its high point in 2013 and 2014, according to our State of the Market Survey.

2017 State of the Market Survey

Click here to view the 2017 State of the Market Survey

Click on the headings below to review and download survey results from prior years.

  • 2016 Summit Survey Results
  • 2014 Summit Survey Results
  • 2013 Summit Survey Results
  • 2011 Summit Survey Results

    2011 State of the Market Survey

    2011 State of the Market Survey

    Click here to view the 2011 State of the Market Survey

    The survey, measuring the attitudes and perspectives of 291 top executives within the US commercial real estate market, reveals 7 out of 10 respondents describe themselves as “bearish” for the next 12 months, up from 60 percent in the last DLA Piper Survey in 2010 but still well off the Survey’s record-high of 90 percent set in 2008. Despite this sentiment, only a slim majority (53 percent) believe that recent capital markets turmoil will significantly derail transactions in Q3 and Q4.

    According to DLA Piper, the survey yielded a number of other interesting conclusions, including:

    • For the first time in the Survey’s seven-year history, the three top-ranked international regions for investment opportunity remain unchanged: Brazil, China and India.
    • As the sovereign debt crisis continues to unfold in Europe, respondents rank the fate of Greece as their primary concern, followed closely by Italy and Spain.
    • After the Survey’s record high expectations for REITS in 2010, respondents expect private equity (35 percent), foreign investors (25 percent) and pension funds (20 percent) to be the most active in the next year, followed by REITs (16 percent).
    • 9 out of 10 respondents expect a cooling of the domestic CMBS markets during the remainder of 2011, predicting volumes to crest well below $40 billion by year end.
    • Consistent with this view, and despite potentially more attractive terms available via CMBS, the majority of respondents (55 percent) report a preference for financing from conventional portfolio lenders, even when CMBS lenders might offer better terms.
      In addition to the raw data captured, survey respondents shared some interesting perspectives when asked whether they thought regulators should do anything further to stimulate the recovery of the US commercial real estate market. Real estate executives reached a consensus, pointedly answering that they favor less regulation and more consistency around tax policy. One respondent aptly described the matter by stating, “When there is no clarity, it is difficult to underwrite the future.”
  • 2010 Summit Survey Results

    2010 State of the Market Survey
    Download a PDF of the 2010 Results

    “Let the cards fall where they may.”

    Faced with billions of dollars in commercial real estate debt coming due, the industry refuses to panic, sensing that the bottom of the cycle is upon us, according to DLA Piper’s 2010 State of the Market Survey.

    Responding to this bottoming out process, the outlook for the US commercial real estate industry remains largely bearish but it is noticeably improving. The bulls among the respondents believe the markets have corrected and that the abundance of equity capital will fuel the comeback. Even among the bears, fears of inflation and a double-dip recession do not appear to be a major concern. This sense of recovery has been buoyed in part by the federal government’s TARP, TALF and other real estate-focused programs.

    Moving forward, however, real estate executives report they do not want nor anticipate any further federal assistance as they prepare to workout and wait out maturing loans.

    Highlights of DLA Piper’s 2010 State of the Market Survey include:

    • The majority of respondents (60 percent) believe that real estate markets have already reached, or will reach, bottom in 2010.
       
    • 6 out of 10 respondents (60 percent) describe themselves as “bearish,” down from a record high of 90 percent in September 2008 when DLA Piper last surveyed the market. Consequently, “bullish” responses quadrupled from 10 to 40 percent.
       
    • 2 out of 3 respondents believe that the federal government’s TARP, TALF and other real estate focused programs have done “enough” to stabilize the real estate marketplace.
       
    • Consistent with this view, the majority of respondents (70 percent) do not expect any additional federal legislation focused on aiding the US commercial real estate market.
       
    • 6 out of 10 respondents (60 percent) do not expect the CMBS market to return in time to help refinance the more than $150 billion in CMBS loans coming due in the next two years.
       
    • Respondents named workouts (40 percent) and loan extensions (27 percent) as the two most prominent strategies for owners and lenders trapped by the refinancing crisis.
       
    • Interestingly, respondents do not expect workouts to yield deep discounts with lenders: 61 percent of respondents expect that the largest loan write-offs will range between 11 and 30 percent.
       
    • Tempering concerns over inflation, 75 percent of respondents think interest rates are headed up, but only “slightly,” in the next six months while another 21 percent of respondents expect “no change” in interest rates.
       
    • Armed with war chests of new capital, respondents expect private equity and hedge funds (37 percent) and REITS (29 percent) to be the most active investors during the next year.
       
    • Multifamily (37 percent) ranks as the most attractive investment opportunity during the next 12 months, while hotels (25 percent) rebounded from last place in 2008 to finish as the second most attractive investment opportunity.

     

  • 2008 Summit Survey Results

    2008 State of the Market Survey
    Download a PDF of the 2008 Results

    The 2008 State of the Market Survey results were released in September 2008 in coordination with the start of the 2008 Global Real Estate Summit.

    “Bigger than the savings and loan crisis.”

    The recent tidal wave of unprecedented events on Wall Street – including Lehman Brothers’ bankruptcy, the federal government’s bailout of AIG, Fannie Mae and Freddie Mac, and Bank of America’s purchase of Merrill Lynch – is creating a sea change in the markets. Accordingly, respondents to DLA Piper’s 2008 “State of the Market” Real Estate Survey report that the current credit crisis has now had a greater impact on the US commercial real estate market than the devastating savings and loan crisis of the late ‘80s and early ‘90s.

    Simply put, financing – or the lack thereof – remains the chief concern of respondents as they flooded the survey with concerns over the availability of credit and debt.

    Frustrated with the ongoing credit crisis that continues to reshape the financial markets, real estate executives are expressing a new record level of bearish sentiment as they continue to be reminded of the cyclical nature of the industry after nearly a decade of prosperity. However, even with the expected recovery further out than many would have predicted even six months ago, respondents still see opportunity in the current market environment.

    Highlights of DLA Piper’s "State of the Market" Real Estate Survey include:

    • Following the recent developments at Lehman Brothers, AIG and Merrill Lynch, the majority of respondents (60 percent) report that the current credit crisis has now eclipsed the savings and loan crisis of the late ‘80s and early ‘90s as the event with the single-greatest impact on the commercial real estate industry during the past 20 years.
       
    •  Interestingly, prior to the events of early September, the majority of respondents said that the savings and loan crisis was the event with the greatest impact on the real estate industry. Sentiment changed in a follow-up survey conducted after Lehman Brothers filed for bankruptcy. (Please see methodology for further details on this follow-up survey).
       
    • Building upon this sentiment, 8 out of 10 respondents do not believe that the recent developments concerning Lehman Brothers, AIG and Merrill Lynch signal the “bottom” of the cycle, nor do respondents think they provide the “first sign of light” at the end of the credit crisis tunnel.
       
    • In terms of the Lehman Brothers’ bankruptcy, the overwhelming majority of respondents (96 percent) agree with the federal government’s decision not to bail out the prominent investment bank.
       
    • A record 9 out of 10 respondents (90 percent) describe themselves as “bearish,” up from 68 percent in October 2007 when DLA Piper last surveyed the market in its 2007 “Credit Crunch” Real Estate Survey, and of these respondents, 71 percent attribute this to continued fallout from the credit crisis.
       
    • Consistent with this outlook, the overwhelming majority of industry executives have concluded that the markets will not improve in 2009: The majority of respondents (62 percent) don’t expect the real estate markets to stabilize until 2010 and 22 percent don’t expect to see stabilization until 2011.
       
    • Two out of three respondents think that John McCain, if elected, is likely to have a more favorable impact on the commercial real estate industry than Barack Obama.
       
    • The majority of respondents don’t expect securitized lending to recover and return to its previous market levels until at least 2011, while 16 percent reported that securitized lending will never again reach its prior levels.
       
    • The majority of all respondents (51 percent) expect foreign investors to be the most active in the US during the next year and, consistent with that conclusion, nearly one in five respondents has engaged in a transaction involving investments from sovereign-wealth funds.
       
    • In sharp contrast to DLA Piper’s 2007 “State of the Market” Real Estate Survey, cap rates and interest rates are expected to move in parallel during the next six months, ending one of the industry’s most significant eras of cap rate compression. 60 percent of respondents think interest rates are headed up while 63 percent of respondents think cap rates are also headed up.
       
    • Hotel and retail investment opportunities have fallen out of favor and rank as the least attractive investments during the next 12 months, while multifamily (50 percent) ranks as the most attractive investment opportunity by a wide margin over the downtown office sector (19 percent).
  • 2007 Summit Survey Results

    2007 State of the Market Survey
    Download a PDF of the 2007 Results

    The results of DLA Piper’s “State of the Market” Real Estate Survey are analyzed and released in conjunction with the firm’s Global Real Estate Summit.

    Over the years, the Survey has established itself as one of the industry’s leading market barometers and has been recognized by a broad range of media outlets in hundreds of stories across the country, including the following highlights from 2007:

    • The April [DLA Piper] survey came just before the subprime-mortgage debacle began spreading into the commercial real-estate markets. An executive then summed up sentiment, telling surveyors, ‘No deal is too big.’”
      - The Wall Street Journal
       
    • Commercial real estate investors and executives believe private equity firms will continue buying up large portfolios of properties over the next year… according to the DLA Piper 2007 ‘State of the Market’ Real Estate Survey”
      - Reuters
       
    • “Nearly four out of five top real estate executives say their 12-month outlook on the U.S. commercial real estate market is bullish, according to the 2007 ‘State of the Market’ real estate survey released today by law firm DLA Piper.”
      - Commercial Property News
       
    • “Exuberance abounds for the commercial real estate market, according to the DLA Piper 2007 ‘State of the Market’ survey, released today.”
      - GlobeSt.com

    • “DLA Piper Survey: ‘No Deal is Too Big.’ Bullish Survey Findings Take a Bearish Turn at Chicago Real Estate Conference”
      - CoStar Advisor
  • 2007 Credit Crunch Survey

    2007 Credit Crunch Survey
    Download a PDF of the Results

    In April 2007 DLA Piper’s “State of the Market” Real Estate Survey found that the year was shaping up to be a “bullish” year for the markets as then-current pricing and abundant capital flows had fostered an insatiable demand for real estate assets. However, in the 4+ months since the Survey, concerns and speculation surrounding the subprime mortgage crisis and so-called “credit crunch” have dominated the headlines, trickling into the real estate markets. To determine just how these developments have really impacted the US commercial real estate market, DLA Piper once again surveyed leading real estate industry executives in September 2007 to gauge how their attitudes and perspectives have changed amid the credit crunch.

    Highlights of DLA Piper’s 2007 “Credit Crunch” Real Estate Survey include:

    • The strains of the subprime lending shakeout and resulting credit crunch have forced respondents to abandon their “bullish” outlook for the US commercial real estate market – only 31 percent describe their outlook as bullish, down sharply from 78 percent in April.
       
    • Consequently, 68 percent of respondents now describe their 12-month outlook as “bearish” – more than tripling the percentage of bearish responses from April (22 percent).
       
    • The overwhelming majority of respondents (61 percent) anticipates that it will take between 9 to 12 months before the real estate markets stabilize from the effects of the credit crunch.
       
    • The effects of the credit crunch on deals in the US commercial real estate market have been widespread, led by tighter loan underwriting standards, increased spreads, increased equity requirements and delayed or cancelled transactions.
      • 63 percent of respondents have been involved in transactions that have been delayed or cancelled due to the credit crunch.
         
      • One out of four respondents (27 percent) report witnessing an increase in loan defaults.
         
    • The market for public-to-private M&A has cooled considerably. Just five months ago 90 percent of respondents expected the recent public-to-private trend to continue unabated. While this figure dropped to 62 percent in the current survey, the majority of respondents still believes that this public-to-private trend will continue despite the credit crunch.
       
    • Despite several verbatim comments to the contrary (see page two), 63 percent of respondents do not believe the Fed should take additional aggressive action to stabilize the credit markets following its Sept. 18 decision to cut interest rates by half a point.
       
    • 80 percent of respondents describe their 12-month outlook for the CMBS market as “bearish” and, as a likely result, 83 percent also expect to see more conventional loans than CMBS loans in the next 12 months.
  • 2005 Summit Survey Results

    2005 State of the Market Survey
    Download a PDF of the 2005 Results

    The results of DLA Piper’s “State of the Market” Real Estate Survey are analyzed and released in conjunction with the firm’s Global Real Estate Summit.

    Over the years, the Survey has established itself as one of the industry’s leading market barometers and has been recognized by a broad range of media outlets in hundreds of stories across the country, including the following highlights from 2005:

    • Cautious optimism among survey respondents exists for the coming year as 97 percent of respondents predict either a “continued boom” or flattening of the current real estate investment market despite rampant external discussion of a real estate “bubble.”
       
    • Multifamily continues to serve as the most attractive real estate investment opportunity in the coming year as 36 percent of survey respondents chose multifamily over other investment options.
       
    • Respondents associated a positive view of the current US economy with continued optimism regarding the US commercial real estate market. A large majority of respondents (62 percent) cited the continued growth of the economy as the primary reason for their confidence in the commercial real estate market.
       
    • The strength of the economy and the status of interest rates continue to serve as the two most important factors in the confidence or lack thereof for survey respondents.
       
    • While a majority of respondents (76 percent) view inbound foreign investment as good for the US commercial real estate market, most respondents (75 percent) have not been influenced by inbound foreign investment in their investment strategies.
       
    • Despite a feeling that interest rates in both the short- and long-term will rise, a majority of respondents (60 percent) predicted that cap rates will hold steady over the next 6 to 12 months. We believe that this data indicates that cap rates are being driven by supply and demand rather than interest rates.
       
    • Despite the fact that only 22 percent of respondents describe themselves as concerned or slightly concerned regarding their 12-month outlook on the US commercial real estate market, there were more “bears” (53 percent) than “bulls” (44 percent) among our survey respondents.