Industrial properties are expected to outperform and to offer the best growth potential among the major commercial real estate categories in 2015.
That’s according to the “Commercial Property Executive’s Quarterly Sentiment Survey.” More than half of the survey’s participants, or 54 percent, expect the industrial sector to be this year’s fastest-growing asset category.
Coming in a distant second was the multifamily sector, cited by 23 percent. That’s in sharp contrast to the previous survey conducted late last year, when 64 percent of commercial real estate executives named multifamily the category most likely to outperform.
The multifamily sector, which has been a favorite of both developers and investors in recent years, is also expected to be at highest risk of overbuilding, according to 46 percent of the CPE 100, an invited group of industry leaders representing a range of CRE business categories.
“CRE executives expect lenders to be more conservative this year.”
The CRE executives also expect lenders to be more conservative this year. Nearly half (46 percent) said they are worried that overbuilding will prompt lenders to underwrite new projects more cautiously this year than they did in 2014. Only 15 percent expect lenders to be more open to lending for new developments, and only 8 percent believe that competition among these professionals will produce more favorable terms for developers. The remaining 31 percent predict conditions for financing new construction to be about the same as last year.
“Development is starting to ramp up, but the good news is that lenders seem to be exercising control, which should prevent the cycle from moving forward too quickly,” noted CPE Editorial Director Suzann Silverman.
Regarding their own companies’ performance, the CPE 100 is less optimistic than they were last year. Only 31 percent believe their businesses will be performing somewhat better in three months. That’s down from 71 percent the previous quarter. The other 62 percent expect their companies’ performance to be unchanged. That’s double the percentage from the previous survey, indicating that many believe the business has peaked.
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