CIT: Regulatory Climate Strains Mid-Market Commercial RE Execs
Middle-market commercial real estate executives are expressing cautious optimism toward the market and are looking to take advantage of long-term investment opportunities. However, the majority are finding that the current tax and regulatory climate is placing a strain on the performance of their companies. These are some of the findings from a recent survey by CIT and Forbes Insights.
“Commercial real estate has been known to be a bellwether for the overall U.S. economy,” said Matt Galligan, president of CIT Real Estate Finance. “As we enter 2014, we are seeing mixed views among middle market commercial real estate executives. The good news is we are definitely seeing renewed optimism and expectations for a more complete recovery down the road.”
• Commercial real estate is in the midst of a cautious recovery: Over half of industry executives (57%) believe that the U.S. commercial real estate market is in recovery, while 1 in 10 say the recovery is very strong. Nonetheless, just under a third warn that certain segments of the industry are poised for significant decline.
• Taxes, regulations and some costs are impeding growth potential: Three out of five executives say the current tax and regulatory climate places a strain on their performance. Just under 60% are concerned by the Affordable Care Act, and nearly half (46%) claim that its implementation will depress the economy. Four out of 10 list the impact of Dodd-Frank on investing and lending as a concern. And nearly 1 in 4 (22%) are concerned by trends in the availability and cost of terrorism insurance. In fact, 23% say the high cost of terrorism insurance will likely stall certain segments.
• Financing ranges from overabundant to questionable: Three out of five (61%) say they have adequate capital for their operations, and 12% of these indicate that capital is overabundant for the opportunities available. However, a third (33%) report that capital availability is spotty. Only 6% say their access to capital is questionable or has completely dried up. Overall, about half (51%) are likely to pursue bank financing in the next 12 months, while 18% of executives say they are very likely to do so.
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