With global stock markets in turmoil to begin the year, all eyes are on the Federal Reserve as U.S. commercial real estate executives ranked rising interest rates as their top concern for 2016, according to Seyfarth Shaw’s inaugural survey of the commercial real estate market.
Taking a closer look at the Federal Reserve, the Seyfarth Real Estate Market Sentiment Survey found that the vast majority of commercial real estate executives are hawkish: Nine out of 10 hold a hawkish outlook for the Fed in 2016, expecting it to raise rates. Of these “hawks,” 71 percent expect multiple rate increases in 2016.
From interest rates to supply and demand issues to terrorism, Seyfarth’s 2016 Survey reveals the top concerns facing the industry:
PAIN POINT: Regardless of how they view the Fed, 43 percent of all respondents believe the U.S. commercial real estate market can absorb a 51-100 basis point increase before experiencing a material adverse impact.
FOCUS ON FUNDAMENTALS: Amid widespread anticipation for a rate increase (or two), respondents ranked commercial real estate supply and demand as their second greatest concern for 2016.
PRESIDENTIAL FAVORITES: With primary season entering full swing, industry icon and Republican candidate Donald Trump is the clear frontrunner: One-third named Trump the “most favorable” presidential candidate for the commercial real estate industry, trailed far behind by Jeb Bush (R - 13 percent) and Hillary Clinton (D - 12 percent) and Marco Rubio (R - 11 percent).
‘GIG ECONOMY’ DISRUPTION: Looking further down the road, respondents named the “gig economy” and the rise of Uber-like on demand workforces as their greatest emerging concern.
THE SPECTER OF TERRORISM: While the majority of respondents (70 percent) are not concerned that an act of domestic terrorism will impact their 2016 projects, the remaining 30 percent are prepared to change how and where they buy, sell, capitalize and lend in response to such an incident.
BRAIN DRAIN: 83 percent of respondents are concerned about the impact of “brain drain” on the commercial real estate workforce as the industry embarks on a major generational shift.
KICKING THE CAN DOWN THE ROAD: Concerns about the industry’s ability to refinance record levels of maturing CMBS loans remain widespread: 87 percent of respondents expressed concern over how the industry will refinance the wave of $111 billion in CMBS loans coming due in 2016.
Seyfarth, which helped client close more than $30 billion in real estate transactions in 2015, surveyed commercial real estate executives in January. For a full copy of the 2016 Seyfarth Real Estate Market Sentiment Survey, visit here.
About Seyfarth Shaw LLP
Seyfarth Shaw has more than 850 attorneys and provides a broad range of legal services in the areas of labor and employment, employee benefits, litigation, corporate and real estate. With offices in Atlanta, Boston, Chicago, Houston, London, Los Angeles, Melbourne, New York, Sacramento, San Francisco, Shanghai, Sydney and Washington, D.C., Seyfarth’s clients include over 300 of the Fortune 500 companies and reflect virtually every industry and segment of the economy. A recognized leader in delivering value and innovation for legal services, Seyfarth’s acclaimed SeyfarthLean® client service model has earned numerous accolades from a variety of highly respected third parties, including industry associations, consulting firms and media. For more information, please visit www.seyfarth.com.
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