Realtor® Confidence in Commercial Market Growing
WASHINGTON (May 16, 2013) – Realtors® who specialize in commercial real estate expressed optimism and confidence in the market during a forum at the Realtors® Midyear Legislative Meetings & Trade Expo. Despite a slow turning economy, commercial practitioners believe the market is not only better off than it was a year ago, but also will continue to improve.
National Association of Realtors® chief economist Lawrence Yun joined several Realtor® commercial practitioners on a panel to discuss the economy and regulatory issues and their impact on the commercial real estate market. Through a live polling of the audience, a majority of members expressed that their local economy is either a little better or showing a major improvement from a year ago.
“Right now we are experiencing a unique recovery phase,” said Yun. “Those in the high income brackets are seeing much improvement in the economy, particularly related to stock market wealth. However, those in lower income brackets are not seeing any growth in their income. Commercial real estate is dependent on the American economy and with an uneven recovery the market still has a way to go before a full recovery.”
Yun reported overall transaction volume in the commercial real estate market is slowly improving and that property sales are rising. In terms of markets, New York City continues to top the list in sales volume; however, Yun pointed out smaller markets like Seattle and Austin are also experiencing significant year-over -year improvements. This indicates that large investors are more willing to purchase in midsize markets.
NAR commercial members typically handle small transactions of one million or less and Yun reported that these sales are starting to improve. “While the prices for deal sizes most frequently handled by Realtors® have not yet stabilized, we have recently seen a positive upturn in sales volume,” said Yun.
In an audience poll, a majority of members reported credit availability for commercial deals is still not good, but better than a year ago.
“There’s capital available out there,” said panelist Daniel Sight, vice president and broker for Reece Commercial. “My feeling is that credit has opened up, but it still helps to have a healthy down payment and good credit history.”
According to NAR data, commercial members receive their financing from mostly regional and local banks, as well as credit unions. Many have reported that it’s still difficult to receive credit because of regulatory conditions and uncertainty. A majority of members say recent legislative and regulatory impacts, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act, have decreased the flow of capital in the U.S. real estate market.
Yun said the multifamily sector has continued to rapidly gain market share at over $84 billion, while the office space sector remains closely behind with over $77 billion. Yun also suggested the apartment sector might be facing a potential mini-bubble. “A bubble for the apartment sector is not out of question,” said Yun. “Apartments are in high demand and multifamily financing is easier to obtain.”
Fifty-eight percent of the polled audience reported they believed the commercial real estate would improve in 2014. “I believe the market will be a little bit better,” said Realtor® Linda St. Peter, Prudential Connecticut Realty. “I don’t think it’s ready for a big improvement, but that fear that paralyzed people is starting to fade and confidence is returning.”
Yun echoed that sentiment and said that improved confidence among business owners could help improve the economy. “What is lacking for a stronger economic growth is confidence,” said Yun. “Our Realtor® members are feeling a little better and that sentiment will hopefully translate to a better market soon.”
Additional panelists for the session were Randy Scheidt, president of Don R. Scheidt & Co., and H. Blaine Walker, president & CEO of Walker & Co. Real Estate.
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.