As residential market improves, commercial real estate property managers are mildly optimistic

Commercial real estate managers remain optimistic about the future trajectory of the market, but artificially low rates still inspire caution.

According to the Mortgage News Daily, Fannie Mae's research team has good news for the residential and commercial real estate markets.

Fannie Mae's economic and strategic research team determined the housing recovery contributed 0.3 percentage points to the economic growth in the first quarter, calling the recovery "undeterred." May's Economic Summary indicates continued recovery as this was the eighth consecutive quarter to see housing growth.

For the first time since 2008, annualized housing starts reached 1 million in March, encouraged mostly by a rally in multi-family building that offset a decline in single family construction starts. The multi-family boom is back to pre-housing bubble levels as the market sees a 65 percent decline in homeownership – the lowest rate since 1995 – as an aging Echo Boomer generation opts to rent in urban areas.

Residual effect of housing recovery
According to Turner Investments latest Sector Focus report, the recovering residential real estate sector will likely work its way into the commercial real estate property market. Turner analysts say there has been a historical correlation, albeit delayed, between an up tick in residential activity and commercial construction, according to the Fort Mill Times.

Optimism is alive, barely
As reported in the latest Sentiment Index from the Real Estate Roundtable, industry executives have a modestly optimistic outlook when it comes to the commercial real estate market in the U.S. 

The second quarter index survey determined an overall Sentiment Index of 69 – unchanged from the previous quarter. Figures above 50 indicate a positive outlook. Senior commercial real estate executives see favorable trends as economic fundamentals show sluggish but steady improvement.

"Commercial real estate executives are seeing increased interest in transactions outside healthy core markets," Jeffrey DeBoer, president and CEO of the Real Estate Roundtable, told "But that sliver of good news is mired in anxiety, centered on whether the development of pro-growth policies could fall victim to political gridlock."

Still, DeBoer cites persistent anxiety in the business world regarding artificially low interest rates and the economic impacts of those rates going up. Of the participants in the survey, 62 percent said market conditions would be "somewhat better" in a year. Last month, that figure was 68 percent. And while many respondents saw increases in asset values, caution was still in abundance as those increases were caused by inexpensive capital.

Disclaimer: All data and information provided on this site is for informational purposes only. makes no representations as to accuracy, completeness, correctness, suitability, or validity of any information on this site and will not be liable for any errors, omissions, opinions or delays in this information or any losses, injuries, or damages arising from its display or use. All information is provided on an as-is basis.