GLOBAL - Commercial real estate investors' reaction to recent market turbulence will differ depending on the risk profile of each individual company, CB Richard Ellis (CBRE) has said, but it predicted that real estate would not fare as poorly as the stock market.
CBRE said investors with higher risk tolerance would seek out opportunities, while more risk-averse investors might delay new deals.
Asieh Mansour, CBRE's head of Americas research, said: "The US faces multiple challenges including tepid economic growth, gridlock in Washington and an unsustainable debt trajectory.
"The main macroeconomic effect of the debt crisis will be heightened volatility - particularly in the stock markets, as investors readjust their growth expectations for the world's major economies.
"Meanwhile, commercial real estate will not fare as poorly because it remains a preferred asset class, within well-diversified multi-asset institutional portfolios."
The report also indicates ample capital available for core deals in spite of early signs of a withdrawal of capital in the CMBS market.
In addition, CBRE said lending rates should stay relatively low, albeit with loans conservatively underwritten with stricter covenants.
"Ultimately," Mansour added, "real estate fundamentals change more slowly than property values or debt availability.
"However, should the decline in business and consumer confidence persist, this will adversely affect the nascent recovery in property market fundamentals we have witnessed over the past year."
The report warns that there will be less transparency on pricing metrics for real estate assets as valuation metrics may become more difficult to underwrite.
It adds: "Reduced investor confidence will increase demand for core assets in primary markets, while assets further out on the risk spectrum - secondary markets, peripheral locations, value-add plays - will be less desirable until economic uncertainty is reduced."