UNITED STATES - Investors are ready to make the most of a predicted decline in value of commercial real estate, the results of Ernst & Young ‘s "Reality Check Survey" suggest.
A poll of 2,300 US clients and subscribers conducted in October revealed 73% of investors said they were "in the market now" for deals today or would be in the first half of 2009, while the rest are expected to enter the market later in 2009.
At least 47% of those polled were real estate service providers while 40% were real estate owners, developers or operators, 12% were capital providers and 2% were real estate occupiers.
Officials claim the study indicates investors are still interested in buying and selling real estate - a view which appears to counter the activity of US pension funds in particular.
Howard Roth, global and Americas leader of real estate for Ernst & Young, said: "Bottom line, assuming the real estate credit flow improves, is that we're nearing the end of a declining cycle, that there are sellers that are willing to sell at further discounted price levels, and that there are active investors in the marketplace. This will help to facilitate movement of assets, a necessary precondition to getting the market back on track," suggested Roth.
Almost 60% of investors said they expected to be "net buyers" in 2009, while a further 33% re as yet undecided.
A predicted fall in property prices is said to have influenced their decisions, as 85% of respondents believe commercial real estate values will decrease over the next year and over half expect property values to fall up to 10% over the same period.
Only 15% said they expected property values to increase or stay the same.
Half the respondents said they would bid on assets offered by the US government's Troubled Asset Relief Program (TARP), of which 1.8% said they would bid on securities and 7.7% said they would bid whole loans.
The U.S Department of Treasury received approval for the $700bn TARP on 3 October 2008, but has recently had its efforts hampered by delays in finding firms to oversee the program.
Of the commercial lenders polled, more than half said at the present time they would not be making loans available to real estate borrowers in 2009, however nearly 70% believe the flow of credit to real estate will improve by the end of next year.