Improving Trends, but Uncertainty Remains: The NAREIM/FPL 2013 Management Survey
NAREIM/FPL 2013 Management Survey Executive Summary
Over the past 18 months, general sentiment in the commercial real estate industry has been one of modest optimism, supported by slow and steady improvements in property fundamentals and gradual growth in the broader economy. This, combined with access to cheap capital, has led to increased transactional activity (up 35% YoY in Q1 2013), cap rate compression (especially in primary assets/markets) and rising asset valuations. In terms of sector performance, public REITs outperformed broader equities in 2012, with the FTSE NAREIT All REIT Index registering a 20% total shareholder return, versus 16% for the S&P 500. In the private sector, the NCREIF property returns (NPI) generated a 10.5% return for the year.
Despite positive overall trends so far in 2013, general sentiment has been tempered somewhat by political and macroeconomic uncertainties, both domestically and abroad. Of particular concern is the future interest rate environment, as some believe that recent industry performance has been driven largely by cheap debt and historically large spreads between cap rates and bond yields. The sharp market response to Fed comments in June, and the relative underperformance of real estate equities in recent months, are evidence of these concerns.← Accounting the Change: Rules, Technology and Fundamentals Combatting the “Age Gap”: How to Address REIMs Changing Demographics. →