Southeast. “I’m very bullish on the market right now,” he stated.
“There are some incredible values to be had. Now is the time to
purchase, improve performance and
position for the turnaround in one to
three years. The turnaround will be
quick and powerful and will happen
inside of one to two quarters.”
“Under-valued public companies
will continue to be targets,” said a
SVP/partner at a brokerage firm in
As for international investments,
they may look tempting, but a vice
president of acquisitions at a private
equity firm in the Southeast
sounded a note of caution: “Offshore investments could get
squashed by too much capital chasing too few investment-grade
opportunities as well as currency and political risks.”
Asked which segments will be the most interesting to watch in
2008, once again, the responses reflected the current focus on fiscal
issues as nearly 52% pegged finance as the most intriguing area,
and CMBS garnered 42% of the first-place votes. Last year, acquisitions earned the top spot, at 31%. This year, the investment sales
scene was still a popular number-one vote getter, catching 34% of
Specifically, those polled wondered if the present tumultuous
state of the capital markets will persist into 2008. “It will be interesting to see the effect of a stagnated CMBS market on a previously liquid real estate market,” stated a vice chairman at a
national investment bank. “Over the past 10 years, it has grown
to be a large force in providing capital.”
“Watching the CMBS debacle play out should be a hoot,”
quipped a president of national financial firm. “Financing availability will also be a key.”
In an interesting twist, TICs, which were barely on the radar
screen of last year’s participants, ranked among the top three. In
2007, a mere 12% placed the tenant-in-common sector as the number-three area of interest. This year, 51% ranked it as third—and not
for positive reasons.
“The TIC market is in trouble,” declared a senior director with
a brokerage firm in the Northeast.
A CEO with a national financial firm echoed those sentiments:
“TICs are aiming for a meltdown if they don’t clean up their act.”
Also worthy of a watchful eye is how national economic issues
impact leasing activity, which 40%
checked as the third area of interest in
the coming year.
“As the economy continues to
slow, it will be interesting to watch
how badly rental rate growth is
impacted,” stated a principal with
a private equity firm out West.
“I’m interested in whether lease
rates will increase on commercial
properties in general,” said a
senior appraiser in the Northeast.
“This could make or break commercial markets by putting legs underneath irrationally low
say finance will
be the most
segment to watch
expect to make
investment to grow
Not all the questions dealt with industry-wide matters. Just
like in 2007, participants in this year’s survey were asked which
areas would their companies focus on as the year progressed.
Hiring young talent was number one, fetching nearly 29% of the
vote a year ago. However, in 2008, cost containment came in
first, with 57.7% of those polled. At 34.7%, hiring young talent
“Got to manage that G&A (general and administrative costs),”
wrote a director of investments for a REIT in the Southeast.
Taking second place slots were promoting diversity and new
technologies (43% each); education/professional development
(41%); and sustainable workplaces/green building (35%).
In the 2007 poll, education/professional development was
picked number two by 33% while promoting diversity was slotted second by about 13%.
“We have a significant number of highly trained people who
will be retiring in the next 10 to 15 years. Hiring and training
great young talent is a challenge,” said a Midwest-based broker.
With all the emphasis on green building methods nowadays,
it is perhaps not surprising that sustainability made quite a leap
from the 11% of participants who ranked it number two last
year. “Creating a sustainable future
for our environment is an idea long
overdue in this country,” said the
vice chairman of the national investment bank.
But in the more immediate future,
those who participated in our survey
expect to make a moderate investment in order to grow their business
over the next 12 months, with 54.1%
checking off that option. That nearly
mirrors the response of the prior
year, when 46% said they planned
to make a modest cash outlay.
Nevertheless, a further drilling down into the tabulations indicates the chill that has descended over the marketplace. In 2007,
32% foresaw considerable investment in their business operations versus 21% in the latest survey. This year, only 3.7%
marked the response for “great investment” as compared to
8.4% in 2007.
In their comments, the respondents seem to suggest the year
ahead will be tough (“Be careful…be very careful,” warned one
Northeast-based CEO), but opportunities can still be found.
“From a brokerage perspective, we expect to work exponentially harder to maintain a volume of business at a fraction
of the pace of the last few years,” stated the investment bank
Said the president of a national third-party services provider:
“Periods when the markets are in the doldrums have proven to
be the best time to upgrade and invest in order to be ready and
at the front of the pack when the markets return.”
Let’s hope that happens by the beginning of 2009, when we
conduct next year’s Outlook Survey.
believe that cost
be a particular
focus for their
Reprint orders: www.remreprints.com
Enter code F02089