CRE Pros Remain Bullish,
Though Perhaps Less So
DLA Piper released a new “State of the
Market Survey” at its 14th Global Real Estate
Summit in Chicago recently, and the results
show that most top commercial real estate
executives remain optimistic. Of the 222 survey participants, 60% said they were “bullish”
on CRE’s prospects. That’s a big drop from
2014, when 89% expressed similar confidence, but considering we’re now seven long
years into a recovery, it’s also a testament to
the industry’s underlying strength.
“If you would have asked me two or three
years ago, I would not have predicted the
optimism would last,” says John Sullivan, US
chair of the firm’s real estate practice.
Several factors stretched out this recovery. “We did start from a
very low point in 2009 and had very slow growth since then.
“But a bull market can last only so long,” he cautions. However,
what will bring this one to a close is still a mystery.
Ninety-two percent of respondents believe interest rates will
increase in the next 12 months, for example, but there is every
sign that these moves will be accepted without derailing the US
expansion. The Federal Reserve has pushed rates gradually,
Sullivan points out, and its transparent process has allowed CRE
executives to bake expected increases into future plans.
The recovery has also been quite resilient. The past few years has
seen a good deal of political turmoil, both foreign and domestic,
but this has caused far less disruption than originally feared. In
fact, in some ways developments such as Brexit and a slowdown in
China “has only strengthened the position of the US” due to its
reputation for transparency and relative stability, Sullivan says.
Just over half of the respondents worried most about a Chinese
slowdown, and 30% considered tensions with North Korea the
most potentially damaging. Sullivan adds that the survey closed
out in late August, before tensions with North Korea rose to an
even higher pitch, and the same questionnaire given today might
push that concern up the list of worries.
Whether that increase in tension will significantly impact commercial real estate is also not clear. In the past, during periods of
geopolitical turmoil “capital tended to move to the sidelines,” says
Jay Epstien, co-chair of DLA Piper’s global real estate practice. But
that doesn’t appear to be happening now. “That’s a big change.”
The shock of Brexit, for example, has not dampened enthusiasm.
“London remains at the top for foreign investors.”—Brian J. Rogal
REIT Boards Could Use More Diversity
Although the REIT sector excels the broader market in a number
of governance areas, the makeup of REIT boards would benefit
from greater diversification. That’s among the conclusions of a
study issued by Ferguson Partners Ltd. earlier this month.
The study, which compared 151 non-mortgage REITs with the
broader Russell 3000 index, found that demographically, REIT
boards are likely to be predominantly male as well as older. Although
just 21% of REIT boards are all-male, vs. 25% of all Russell 3000
companies, 73% of REIT boards have no more
than one female director. In comparison, 39%
of Russell 3000 boards have two or more
female directors, compared to 27% for REITs.
Even as most directors of publicly traded
companies are in their 50s and 60s, those serv-
ing on REIT boards are more likely to skew
older. One-quarter of REIT directors are 70 or
older, compared to 19% for Russell 3000 com-
panies. At the other end of the spectrum, REIT
directors are slightly less likely to be under 50.
“We found that there is also a need for
REITs to recruit directors outside of their
industry,” says Annalisa Barrett, founder and
CEO of Board Governance Research LLC,
which conducted the study for Ferguson.
“Currently, more than 52% of REIT directors
are actively employed by a real estate company
or a REIT. More forward-thinking boards are
now recruiting directors outside of the real estate industry to obtain
more diverse views, bring fresh ideas to the table and to avoid possi-
ble conflicts of interest issues.”
REITs do earn high marks for separating the roles of CEO and
board chair, as governance experts advocate. The study found that
64% of REITs have made this separation, compared to 58% of com-
panies in the broader market. The REIT industry is also far ahead
of the broader market in declassifying the board and holding
annual director elections. Eighty-seven percent of the REITs stud-
ied require their directors to stand for election annually. That’s
half again as large as the percentage of Russell 3000 companies
that mandate annual elections.—Paul Bubny
Realty has hired Kyle
Torpey a director of investments, as the real estate
private equity firm grows its
investment team. He was
formerly a vice president
in the real estate investment banking division of
A member of the number-one ranking office leasing team
was inadvertently left off the listing. The entry should
have appeared as follows:
September 2017 | Top US Office Brokers
EVP & Director
EVP & Director
New York City
Focus: Metro New York City
Total No. of Deals: 131 (#1)
Total Square Footage:
2,429,677 SF (#2)
Total Dollar Volume:
Chairman & CEO
The correction has been made to the digital issue, available
We apologize for the error.