Realty Execs Say Property Values, Rents Will Drop
Julavits, Robert, American Banker
Expectations are widespread in the real estate business that the economic downturn, which so far has largely spared it, will hit it soon.
Forty-eight percent of the 120 real estate executives polled Monday at the Commercial Property World conference in New York predicted that property values will decline over the 12 months. Only 9% predicted an increase.
And a whopping 74% expect rents to decline.
Officials of KPMG LLP, which did the survey, said they wanted to check the pulse of the commercial real estate and housing markets, given all the "economic trauma" on the landscape.
The results provided no major surprises but reflect a general malaise in those markets which has seeped in from the growing distress in the broader economy, said Ray Milnes, national industry director of real estate for KPMG.
"People are cautiously concerned about what will happen in the future," said Mr. Milnes. "As a result of the economic downturn, people are expecting demand will weaken, which means more risk -- and consequently, buyers are going to expect a higher rate of return and pay less."
Nonetheless, Mr. Milnes said the fact that only half of the respondents predicted declining property values is a result of a much healthier real estate market today then during the last economic downturn, in the early 1990s. Overbuilding helped lead the problems a decade ago, he said, but industry executives feel the fundamentals in the real estate market today are much better.
Indeed, over the last few months several observers have said that real estate development has been restrained and cautious, and that a much-needed discipline has been employed in the lending system.…
Questia, a part of Gale, Cengage Learning. www.questia.com
Publication information: Article title: Realty Execs Say Property Values, Rents Will Drop. Contributors: Julavits, Robert - Author. Magazine title: American Banker. Volume: 166. Issue: 54 Publication date: March 21, 2001. Page number: 11. © 2009 SourceMedia, Inc. COPYRIGHT 2001 Gale Group.
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