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.