by Rebecca Walker — April 5, 2010—Roughly three-quarters of executives expect both commercial property values (76 percent) and asking rents (73 percent) to continue to fall in 2010, according to a recent online survey of more than 325 executives conducted by Deloitte.
“The commercial real estate market continues to be adversely affected by one of the deepest recessions in decades. Increased unemployment has resulted in less demand for office space, reduced rents and an overall decline in commercial property values,” said E.J. Huntley, principal, Deloitte Financial Advisory Services LLP and national leader of the real estate consulting practice.
“Right now, commercial real estate executives are weighing their options, determining if the time is right to invest while prices remain depressed and before interest rates begin to rise.” Roughly three-quarters (74 percent) of executives expect interest rates to rise in 2010, with 48 percent expecting rates to increase by 50 basis points or more, according to the online survey. Executives also think cap rates (59 percent) and discount rates (57 percent) will rise; 40 percent predict cap rates to rise by 50 basis points or more and 35 percent anticipate discount rates will rise by 50 basis points or more.
Almost two-thirds (63 percent) of executives surveyed predict that a full recovery of the market will require two to three years, while 29 percent believe a full recovery will take four years or longer. Only 8 percent anticipate a full recovery within the next year.
For the survey, Deloitte contracted Bayer Consulting to conduct an online survey of 327 executives, including 186 executives from real estate companies and 141 executives from corporate tenants, regarding real estate recovery.
For more information, see the Deloitte Web site.
